What happened to the gigantic US investments planned through BD Finance

The stretched legal preparation amid the recipient company’s own transformation and the changed market dynamics in 2022 together disrupted the Bangladesh Finance Ltd plans to receive equity investment, foreign currency loans and project financing from USA-based Sovereign Infrastructure Group LLC (SIG), said Kyser Hamid, managing director and chief executive officer of the non-bank financial institution (NBFI).

Bangladesh Finance Ltd, formerly known as BD Finance, signed a memorandum of understanding in the Bangladesh embassy at Washington DC in April 2021 in this regard and since then no funding has taken place.

Meanwhile, BD Finance stock price soared and corrected to some extent in 2022 and some stock investors questioned the authenticity of the announced plan to receive around $2 billion financing in two years. Even the securities regulators have been checking the documents in response.

Kyser Hamid, while speaking in The Business Standard’s capital market show – TBS Markets – this week, shared the updates and explained the reasons.

BD Finance itself has been going through a transformation process since the pandemic to grab a bigger market share. The SIG also rebranded itself as SovInfra.  

All the legal procedures and preparations from BD Finance’s end took 8-9 months and when its US counterpart accomplished theirs in the last quarter of 2022, the market dynamics changed, he said.

The foreign loans expected at less than 5% interest became subject to 8-9% interest per annum because of the surge in US interests amid decades-high inflation.

It was a blessing in disguise that BD Finance was yet to receive any foreign funds, said Hamid, adding that borrowing at the surged rate on top of the foreign exchange risk would have increased BD Finance’s liabilities in local currency terms significantly.

For instance, Taka depreciated against the dollar by more than 20% in less than one year and any sum of dollar liabilities would be one-fifth or one-fourth bigger in a local balance sheet.

Meanwhile, SovInfra’s Bangladesh economy outlook slightly deteriorated, said Hamid.

He, however, added that the two are still in continuous discussion for pouring foreign funds into Bangladesh through mitigating interest rate and forex risks.

Convertible debts, preference shares, and many other options are being explored amid the forecasts of further appreciation of dollar against Taka, according to the Bangladesh Finance CEO who is expecting some positive announcement this year.

Kyser Hamid with his experiences at Brac Bank, DBH, IDLC and IPDC Finance joined BD Finance in September 2020 to lead the ongoing transformation of the NBFI.

And, through adopting the right business model of less dependence on bank borrowing and having more customer deposits, less lending to the corporates and more to the small clients to control nonperforming loans, having Shariah finance window, leveraging technology in cost effective operations, revamping capital market operations and relevant subsidiaries, implementing better corporate governance and disclosure standards the transformation is at its full pace, he elaborated each at the show alongside sharing the company’s 2022 performance and short and mid-term outlook.

Hamid himself is a capital market investor from his retail capacity and barely deposits in banks as he believes in some risk-taking in stocks which are not junk and are not rallying based on rumours.

Alongside research of the company fundamentals, he prefers the studies of market movement for a better return.

Most importantly, with no leverage he prefers to behave steady in the stock market.

He himself and his investment teams have significantly beat the market last year.

The economy, having many challenges ahead, also has huge opportunities to capture, he believes.

For example, the remittance inflow declined despite a big jump in manpower exports in 2022. If the remittance can be brought in official channels by offering the expats a good incentive, the remitters will be motivated to remit more.

Alongside this, if enough loans are disbursed among manufacturers, agro producers, 2023 just may end better than 2022 did, he hoped.