Ashuganj Power’s bond issue may be cancelled due to undersubscription

The public issue of Ashuganj Power Station Company Limited's bonds may be cancelled due to undersubscription. 

Of the planned issuance of bond units worth Tk100 crore, investors have applied for units worth Tk35 crore only, which is well below the regulatory condition of the minimum 65 percent subscription. 

Md Sohel Rahman, CEO of ICB Capital Management Ltd, the manager to the issue, told The Business Standard that undersubscription may lead to cancellation of the public offer, as per the Public Issue Rules.  

The state-owned power producer opened subscription for their bonds on September 26 and closed it on October 6. 

Before opening subscription, AMM Sazzadur Rahman, managing director of Ashuganj Power, had told The Business Standard that the fund would be used to build a 400MW power plant, which would go into commercial production towards the end of 2020.

Asked why they were issuing bonds instead of shares, Sazzadur Rahman said it was the government's decision to raise money in the shortest possible time and issuing bonds was the best way for that.

Earlier this year, the company had issued bonds worth Tk500 crore through the private placement among state-owned banks and financial institutions. 

The remaining Tk100 crore was scheduled to be collected from public subscription that would let the bond be a tradable one in the stock exchanges. 

The capital market investors in Bangladesh had been looking for diversified investment opportunities and bonds could cater to the need. 

But, the current money market situation, capital market sentiment, along with the comparatively low interest offered against the Ashuganj Power bonds, has resulted in undersubscription, according to market analysts. 

Mohammad Abul Mansur, the company secretary of the issuer, said, "The government decided to collect a minor portion of the necessary fund [to finance the expansion] from the public market with a view to cater to the capital market demand with debt securities. But it seems the market needs awareness in this regard. 

"However, let us get the official subscription data tomorrow and submit it to the Bangladesh Securities and Exchange Commission [BSEC]," he added. 

The offered bond 

On July 2, the BSEC had approved the company's application to issue two lakh units of coupon bearing, non-convertible and redeemable bonds, with a face value of Tk5,000 for each unit. 

Fifty percent of the bond units were offered to eligible institutional investors, including collective investments and mutual funds. Against the Tk50 crore offer, they subscribed for units amounting to Tk22 crore only. 

The remaining 50 percent were offered to general investors, including non-resident Bangladeshis. Investors belonging to this category subscribed to units worth Tk13 crore only. 

The bond, with a tenure of 7 years, offered interest rates ranging between 8.5 percent and 10.5 percent. 

ICB Capital Management and BRAC EPL Investment Limited are the issue managers for Ashuganj Power. ICB Capital also worked as the trustee of the debt securities. 

The long-term credit rating of Ashuganj Power is "AAA," while the short-term rating is ST-1, that portray one of the best financial pictures in terms of paying liabilities back in time. 

This rating will be valid till December 5, 2019. Credit Rating Information and Services Limited gave the rating after analysing the financial reports and other issues of the company till June 30, 2018.