Nagad’s Tk 510cr bond gets nod

The stock market regulator has approved Nagad's zero coupon bond on condition that some regulatory requirements are fulfilled for raising Tk 510 crore in funds.

A zero coupon bond is a debt instrument that does not pay interim coupons but instead trades at a deep discount, rendering profit at maturity, when the bond is redeemed for its full face value.

The decision came in a meeting of the Bangladesh Securities and Exchange Commission (BSEC) on Sunday presided over by Chairman Shibli Rubayat Ul Islam.

The regulator, however, did not mention this in its press release. Nagad has been asked to submit the bond's trustee deed registration, clearance of all directors from Credit Information Bureau and a no objection certificate from Bangladesh Bank, said a BSEC official.

Nagad is not listed so the approval news need not be in the press release, he said at first.

Actually the commission did not want to publish the news, he later admitted, repeatedly requesting not to be named considering sensitivity of the matter.

Another BSEC official acknowledged that Nagad's bond was approved despite some issues being raised by the regulator's department which deals with capital issues.

The main observation was that it had been doing business using a no objection certificate instead of a licence, he said, adding that the company was trying to get a license complying with some conditions set by Bangladesh Bank.

The government and private firm Third Wave Technologies agreed to share Nagad's ownership by 51 per cent and 49 per cent respectively, he said.

The company is doing good business and investors are ready to invest so the regulator approved its zero coupon bond, he added.

With a paid up capital of Tk 3.5 crore, Nagad wants to raise the capital to pay off existing debts, support capital expenditure and meet working capital requirements to expand its business in the mobile financial service sector.

The sector has been growing fast since it was launched in Bangladesh in 2011.

Nagad has Tk 416 crore in debt, of which the company plans to pay off around Tk 350 crore through the bond issuance, according to its filing at the BSEC.

It wants to use around Tk 100 crore to manage day-to-day operations, said the application.

Kiu Global, a US-based digital services company, has already expressed interest to subscribe to $30 million (Tk 254.45 crore) of the bond, Nagad said in a press release last month.

The bond issuance announcement came on July 26 in New York at an investors' road show organised by the BSEC.

Nagad, which is one of the key partners of the event, has received initial approval from the BSEC for issuing the bond, the company said in a statement.

Riverstone Capital is acting as the arranger of the bond while Green Delta Capital will be the trustee, it added.

ZA Capital Advisory is the official financial consultant for the bond, according to the statement.

Investors of the bond would get Tk 750 crore at the end of its five-year maturity period.

"We are yet to get any written document about the bond approval, but we are ready to fulfil all the conditions," said Muhammad Zahidul Islam, head of communications of Nagad.

"With the bond proceeds, we want to cater our services to the rural people," he said.

Responding to a question, Islam said Nagad was working on getting the licence.