Nagad to issue Tk 500cr zero-coupon bond
Nagad, which acts as the main agent for mobile financial services (MFS) of Bangladesh Postal Office (BPO), plans to raise Tk 500 crore through a zero-coupon bond to pay its loans, develop networks and buy IT equipment for business expansion.
The company said investors of the bond would get Tk 750 crore at the end of its five-year maturity period.
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.
Nagad, a name taken on by Third Wave Technologies in February this year, took the initiative to borrow through the bond in June this year.
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 MFS sector, which 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 Tk 350 crore through the bond issuance, according to its filing at the Bangladesh Securities and Exchange Commission (BSEC).
It wants to use Tk 100 crore of the money raised through the bond to manage its day-to-day operations, said the application. Nagad said many foreign investors have shown interest in the bond.
Kiu Global, a US-based digital services company, has already expressed interest to subscribe to $30 million (Tk 254.45 crore) of the bond, the company said in a press release.
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.
Tanvir A Mishuk, managing director and co-founder of Nagad, said the bond market had turned vibrant in the recent past.
"We consider this as a better source to raise investment," he said.
Nagad has secured 5.3 crore customers within two years and three months. Its customers are transacting Tk 700 crore daily.
To maintain the growth momentum, it is essential to build a new digital ecosystem and infrastructure, Mishuk added.
BSEC Chairman Professor Shibli Rubayat-Ul-Islam said the stock market regulator was working towards the development of Bangladesh's capital markets, particularly the debt market, to help meet the long-term needs of industries and infrastructure.
Mohammad Rezaul Karim, spokesperson of the BSEC, said Nagad was yet to get the final approval for the bond but it had placed its application.
"Its approval is in the final stage," he said, adding that the regulator gave a no-objection certificate to Nagad to go for an MoU with the foreign investor.
As an MFS, Nagad has been operating without any full-fledged licence from the central bank since beginning its journey in March 2019.
Bangladesh Bank by the end of June this year extended the interim approval for another three months to September. This was the third extension.
In March last year, the central bank asked lenders not to provide any service to unauthorised payment or MFS providers and operators in the interest of depositors.
This forced the BPO to take an interim approval from the central bank for six months as all banks had suspended transactions with Nagad.
Third Wave Technologies had been acting as master agent of the MFS termed as Nagad since the BPO launched the service. Later the company was renamed Nagad.