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PLCs seeking big loans from Janata Bank must go for IPO

Bank signs deal with ICML to process issues

REJAUL KARIM BYRON
Any public limited company (PLC) seeking loans from Janata Bank above Tk 5 crore must raise minimum 50 per cent of its equity from the stock market.
Investment Corporation of Bangladesh Capital Management Limited (ICML) will process the proposals for fund raising and act as 'manager to the issue'.
A memorandum of understanding (MoU) to this effect was signed yesterday between the Janata Bank and ICML. Janata Bank Deputy General Manager of Fund Management Division Nazli Shamima Firdous and ICML Chief Executive Officer Md Jahangir Miah signed the deal.
Janata Bank Managing Director Murshid Kuli Khan and ICB Managing Director Ziaul Haque Khandokar were present during the agreement signing.
The MoU is the fist of its kind between a nationalised commercial bank and an issue manager aiming to raise number of good securities in the stock market to make it vibrant.
Under the MoU, projects with good projected profitability and dividend paying ability will be considered for sanctioning loans, with special priority on projects in pharmaceuticals, engineering, power, telecommunication, oil, gas, infrastructure development, information technology and medical services.
According to the terms of the MoU, Janata Bank will try to keep the debt-equity ratio at a level of 60:40 or 50:50.
"Of the equity portion, 50 to 60 per cent would be mobilised by the promoters of the company while remaining would be raised from the capital market through issuance of shares," the MoU said.
On completion of the project appraisal report (PAR), the agree-
ment said, Janata Bank would be entitled to charge appraisal fee and before placing it to the board for sanctioning loan, the JB would send the PAR to ICML for comments regarding profitability and possibility of raising fund from the market.
The ICML after scrutinising the matter would give its comment and convey the findings within 15 days to the bank. On the basis of comments Janata Bank would finalise
the financial plan and sanction loans accordingly.
In the next course, Janata Bank would send a copy of the loan sanctioning letter to ICML stating the terms while approving the loans so that the ICML can take necessary steps for fund raising from the stock market.
The ICML would perform all the activities of managing the issues which are sanctioned by the Janata
Bank, select underwriters, raise funds through private placement before going for initial public offerings (IPO).
The issue manager will also arrange bridge financing from the merchant banks or other financial institutions. It will charge a fee for managing the issue and also decide the price of the issue and the time of going for IPO.
Janata Bank Managing Director Murshid Kuli Khan said the move will help bring good companies into the stock market as per directive of the finance minister. "We are the first bank to follow the guidance of the finance minister."
Finance Minister M Saifur Rahman in a meeting with the central bank governor and the chief executives of NCBs, specialised banks and financial institutions last month advised the banks to discourage term loans and increase equity portion of the debt-equity ratio.
The minister's directive on debtequity ratio aimed at encouraging the banks to contribute more in bringing vibrancy in the stock markets.
ICB Managing Director Ziaul Haque Khandokar said the number of attractive shares and debentures will increase in the stock market and are expected to perform well. "Such issues will restore confidence of the investors."