Nagad ownership row ends

The government and private firm Third Wave Technologies have agreed to share the ownership of Nagad – the fastest growing mobile financial services (MFS) provider in the country – with a view to fulfilling the licensing conditions set by the Bangladesh Bank.

The Directorate of Posts will own 51% of the company, while the remaining 49% share will be held by Third Wave Technologies Limited, said sources at the Posts and Telecommunications Division.

The decision was made on 30 June this year at an inter-ministerial meeting of representatives from the Posts and Telecommunications Division, the Bangladesh Bank, the Registrar of Joint Stock Companies and Firms, and Third Wave Technologies. Post and Telecommunications Secretary Afzal Hossain chaired the meeting.

It is learned that work is underway to finalise the Memorandum of Association, Articles of Association, and Vendors Agreement of the company following the decision of the meeting.

According to the minutes of the meeting, the board of directors of Nagad will comprise nine members – five including the chairman will be appointed by the government and the other four including the managing director will be chosen by Third Wave Technologies.

The company will be registered with the Registrar of Joint Stock Companies and Firms as Nagad Bangladesh Public Limited Company.

Nagad was granted time extension three times in two and a half years for the Bangladesh Bank's no objection certificate to continue operations, but it is still operating without a licence because of differences between the postal department and Third Wave Technologies over ownership of the MFS platform and the composition of the board of directors.

Third Wave Technologies Limited has changed its name to Nagad Limited. The meeting decided that the company will revert to its previous name before registering the MFS as Nagad Bangladesh Public Limited Company.

As per the decision of the meeting, the Posts and Telecommunications Division on 10 August sent its draft documents to the finance, commerce and law ministries, the Financial Institutions Division, the Registrar of Joint Stock Companies and Firms, and the Bangladesh Bank seeking their opinion on the formation of a subsidiary company – Nagad Bangladesh Private Limited Company.

As per the Companies Act, details of the overall issues – including profit and loss, assets and liabilities – relating to the formation of the subsidiary company will be sent to the Prime Minister for approval. The company will be formed after the PM gives her nod.

According to the draft Memorandum of Association of Nagad, the authorised share capital of the company is Tk100 crore, which will be divided into 5.1 crore ordinary shares worth Tk10 each and 4.9 crore preference shares of Tk10 each.

Safayet Alam, executive director of Third Wave Technologies Ltd, was quoted as telling the inter-ministerial meeting that Nagad's activities were increasing day by day and daily transactions were growing fast.

"If this trend continues, it is expected that the MFS market will grow in size in the next few years. In that case, the company may require a large investment.

"Since the postal department is going to have 51% stake in the company for using its reputation and infrastructure, it will also have to invest in proportion to the ownership of shares if new capital is required in the future," he said.

Speaking on this point, Siraj Uddin, director general of the Department of Posts, said, "The postal department will not bear any liability of Third Wave Technologies before the formation of Nagad Bangladesh PLC."

Abu Essa Mohd Mostafa Bhuiyan, deputy registrar of the Registrar of Joint Stock Companies and Firms, said according to the Companies Act, shareholders have to share both the profits and losses of a company. There is no scope for forming a company on the basis of revenue sharing alone.

Tanvir A Mishuk, managing director of Nagad, told The Business Standard that the legal process of forming Nagad Bangladesh PLC is going on to accelerate its business. Necessary documents have been submitted for perusal and soon after the inter-ministerial review ends, the matter will be placed for its implementation.

"The process would have been completed by now, but strict lockdown and subsequent slowing down of regular office work has posed some challenges. However, we are very hopeful to get a positive result on it very soon," he said.

Asked if he wanted to enlist Nagad on the stock market, he said, "Definitely we have such plans and we want investors' regular participation in the company, which I believe would strengthen Nagad. It will take another two to three years to make that happen after shaping the company in terms of profitability.

"For the future market or business expansion plan, our first priority is to cement Nagad's business across the country and expand its service horizon ensuring citizens' digital life. For expanding Nagad's business, our first priority is to ensure the best quality service for the rural parts of the country as like urban parts."

Nagad currently has 5.40 crore registered customers. Its average daily transaction is Tk700 crore.