The Sukuk will be issued for the purpose of construction of the solar projects of Teesta Solar and Korotoa Solar, the two subsidiaries of Beximco Power Company

Beximco is set to display its trend-setting calibre after its board directors gave their nod to issue a Tk 3,000 crore Sukuk bond to finance construction goals and equipment procurement, in process making it the largest Sukuk issuance from the Bangladeshi private sector.

The Sukuk will be issued for the purpose of construction of the solar projects of Teesta Solar and Korotoa Solar, the two subsidiaries of Beximco Power Company and financing and refinancing the machinery and equipment required for expansion of Beximco’s textile division, said a disclosure yesterday.

A Sukuk is an Islamic financial certificate, similar to a treasury bond, which complies with Shariah laws.

As per the disclosure, 50 per cent of the Sukuk would be privately placed while 25 per cent would be reserved for Beximco shareholders and the remaining 25 per cent would be floated through public offers, as the Sukuk would be listed on the local bourses upon getting the Bangladesh Securities and Exchange Commission (BSEC) approval.

In December last year, the government issued the country's first-ever Tk 8,000 crore Sukuk for a safe water supply project. Investors submitted bids worth Tk 15,153 crore during the auction.

Beximco's Sukuk units will have a face value of Tk 100 each, while minimum subscription size will be Tk 5,000 only in public offer with five years tenure. Sukuk holders will receive their periodical profits twice a year.

The base rate of the Sukuk has been set at 9 per cent, which means investors would be getting 9 per cent secured annual return.

Also, the Sukuk holders will have the option to convert up to 100 per cent of their investments in the Sukuk into ordinary shares of Beximco within five years, said the company.

The issuance of Sukuk bonds can create opportunities for investors from Malaysia to look into Bangladesh as another potential investment destination, said experts.

They also recommended the simplification of the Sukuk issuance process, streamlining regulatory procedures and offering tax incentives for both issuers and investors with regards to the Sukuk market.

As mega projects are developing in Bangladesh, there is a need for more investment. The demand for this investment can be met through Sukuk bonds, said Ali Ahsan, head of Islamic origination at Standard Chartered Bank.

"Long-term finance for the development of the private sector is necessary. We are mostly dependent on commercial banks for any financing. But banks are not supposed to provide long term funds," said Shibli Rubayat Ul Islam, chairman of BSEC.

There are many opportunities to launch Sukuk Bonds in Bangladesh. It is possible to get good returns from this bond, he added.

Beximco has set an extraordinary general meeting (EGM) virtually on April 15.

The record date for EGM is March 24.

Investment banking sources said that City Bank Capital Resources Ltd is working as the advisor, arranger, and issue manager for the Sukuk.

The margin was set at 10 per cent of the difference between the base rate and the annual dividend that Beximco will pay in a specific year.

The record date to determine Sukuk holders’ eligibility to convert into ordinary shares of Beximco will be 12 months after issuance of the Sukuk and the said date shall be the record date for the subsequent years till maturity.

The record date to determine Sukuk holders’ eligibility to receive half yearly periodic distribution amount shall be six months after the issuance of Sukuk and thereafter, every six months till maturity.

If any Sukuk holder does not exercise the conversion option in full or in part during the tenure of the Sukuk, the remaining amount of the Sukuk holder will be redeemable at maturity in a bullet payment.

Beximco is pinning great hopes on solar energy, with the company last week raising its stake in its subsidiary Beximco Power, whose main focus is clean energy.

Beximco bought an additional 3.5 crore shares for Tk 35 crore of its power-generating subsidiary to bring the total holding to 7.5 crore shares, which is 75 per cent of the company.

The remaining 25 per cent shares are held jointly by ASF Rahman, Salman F Rahman, Nazmul Hassan and OK Chowdhury.

The company logged in a profit of Tk 44.6 crore in its 2019-20 financial year that ended on June 30, down 68.7 per cent year-on-year.