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Bangladesh - December 19, 2023

Cash crunch hits ICB operations

Incurs Tk 236 cr loss in Q1

Staff Correspondent: State-owned non-banking financial institutions and one of the largest institutional investors in the capital market, Investment Corporation of Bangladesh (ICB), are facing a deepening cash crunch. The reasons for this have been identified as the slowdown in the capital market and the floor price. ICB suffered a big blow at the beginning of the financial year 2023-24.
ICB has incurred Tk 236 crore loss in the first quarter of this financial year. The state-owned enterprise has not incurred such huge losses before. The financial crisis is due to a significant decline in ICBI capital gains, which is mainly due to the inability to sell shares worth Tk 15,000 crore due to the floor price. Floor price is the lowest limit of share sale price below which shares cannot be sold.
ICB is already in a financial crisis due to a significant amount of investment held as deposits in various non-bank financial institutions, and there is no sign of getting these funds back soon. Amidst these difficulties, ICB is not able to return the money to the customers, the situation is such that the customer is unable to return the money even after the expiry of the fixed deposit period.
The investment corporation invests in the capital market by taking deposits from government agencies, banks, financial institutions and individual customers. Pays customers periodically from income earned through investment in shares. ICB officials say that they do not see any possibility of the situation changing until the capital market is mobilized with fresh funds or by adjusting the floor price.
ICB Managing Director (MD) Abul Hossain said, I am unable to sell shares due to the floor price. There are no buyers in the market. Capital gains are less due to not being able to sell shares, resulting in significant losses. He said, because the capital gain is low, I am unable to pay the customer. For now, the contract is being extended by paying interest. Hopefully, if the floor price is lifted, this problem will not exist. Stating that the shares are being sold as soon as buyers are found, the MD of ICB also said that the shares of many banks listed (in the capital market) have been sold in the last few weeks. About 5-10 percent of the total shares of those banks were held by ICB. Sold in block market due to need of money.
Big loss in the first quarter of FY 2023-24: The financial report of the corporation indicates a huge reduction in their capital gain. In the first quarter of the financial year 2023-24 which has decreased by 90 percent to Tk 15.78 crore. In the same period of the last financial year, the capital income was Tk 157 crore. In FY 2022-23, ICB’s profit fell by 49 percent to Tk 77 crore, which was Tk 144 crore in FY 2021-22 and Tk 115.33 crore in FY 2021-21. During this time, the income of the institution from dividends and fees, commissions and service charges has also decreased drastically. Regarding the cash crisis, Abul Hossain said that in the last few years, ICB has invested about Tk 3000 crore from various government institutions in the capital market. But in the current situation it has become very challenging to get from any organization.
He said there would be no problem in repayment if new funds were received. But the institutions which have brought funds (earlier) are now asking for refund. He expressed hope that if the sale price limit of shares is lifted after the election, it will be possible to keep the payment promises. ICB owes Tk 89 crore to BSCIC, which deals with small and cottage industries. BSCICs deposit their provident fund and government loan money in ICB as fixed deposits. This money is deposited through a total of 17 FDRs. These phased deposits expired in July, August and September this year. BSCIC formally wrote to ICB to encash the dues. In the first week of November, BSCIC again sent a letter to the Ministry of Finance and Bangladesh Bank, along with ICB, as they did not receive the money. In that letter, ICB was urged to send through pay order in the name of BSCIC head office on an urgent basis. If not, legal action will be taken, BSCIC sources added. An official of ICB said that only interest was requested to extend the period for repayment. However, BSCIC does not want to renew the contract. This has resulted in the current impasse. Earlier, ICB could not refund the full amount of the state-owned Western Gas Company Limited, which is in charge of supplying gas to the northwestern region of the country.
In April this year, the gas company requested to monetize the fixed deposit of Tk 84 crore in ICB at the end of the term. But, ICB was able to pay only Tk 67.69 crore. After sending several letters to get the balance back, with no action, the gas company sought Bangladesh Bank’s intervention. In response to a letter from the central bank in this regard last month, the ICB said there were not enough buyers in the capital market to sell the shares and they would repay the dues once the financial market stabilized. In a letter sent on March 23 this year, the ICB blamed global economic instability and recession for the lack of buyers. The ICB had said the same in February last in response to another letter from Bangladesh Bank asking for the return of deposits of the Western Gas Company.

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