Investment Corporation of Bangladesh is metamorphosing into a loss-making concern for making supporting the stock market its chief objective rather than making money, fattening the list of unprofitable state-owned enterprises.
In the first quarter of fiscal 2019-20 the listed investment bank incurred losses of Tk 134.30 crore, when it had not seen losses in the last 12 years at least, as per its available annual reports.
Yet, it has no plan for boosting its revenue; it is just biding its time and waiting for the stock market to pick up — to get back to green.
“ICB is the only one propping up the market, so it could not sell shares when necessary,” said its Managing Director Md Abul Hossain.
The problem started from the last fiscal year, when its profits plunged to a 12-year-low of Tk 60.13 crore due to a big blow from capital gain, its biggest income source.
Capital gain, which refers to the profit earned by selling shares at a price higher than their buying price, had dropped about 42 percent year-on-year to Tk 463 crore.
During the period, DSEX, the benchmark index of the Dhaka Stock Exchange, surged 99.21 points, or 1.86 percent, to 5,430.04.
“If we sold shares at that time the index would have sunk. As we didn’t sell shares to support the market, our capital gain eroded.”
Though the government formed ICB in 1976 to support the market it enjoys same advantages of private one.
“If we find funds with zero interest then we can continue to support the market and make profit,” the managing director said.
“It’s true that if we continue to buy shares and not sell our losses will only get bigger,” he said adding if the stock market rises then ICB may book profit in future.
ICB’s portfolio value stood at Tk 12,624.74 crore at the end of fiscal 2018-19.
Had the company sold off its holdings on June 30 last year it would have garnered losses of about Tk 1,017.53 crore. Were those shares sold now the losses would have been even bigger.
ICB must invest in a way that its long-term viability is ensured, said Mizanur Rahman, professor of the Accounting and Information Systems department of the Dhaka University.
“They are supposed to be more professional about their investment decisions as it uses public money. So they must target profit-making.”
He also called for more institutes to come forward to play the role of the market makers and lighten some of ICB’s load.
Market makers are authorised to keep the prices of shares within a certain range through buying and selling securities based on fundamentals of companies depending on the market situation.
The commission framed the market maker rules in 2000 and amended them on June 13, 2017.
However, no one has so far showed interest in becoming market maker because of the tough regulatory framework and less opportunity to maximise profits.
Even after the market crash of 2010 ICB logged in more than Tk 300 crore profits in every year until fiscal 2018-19.
Thanks to the drop in profits last year and its descent into losses from there onwards, the company’s stock price came crashing down to Tk 77.50 yesterday.
An investor Masum Ahmad said ICB provided more than 30 percent dividend in the last few years save for fiscal 2018-19.
“So, it is disheartening for investors that a high dividend paying company fell into losses.”
Market makers should provide support now, the investor added. In fiscal 2018-19, the combined losses of state-owned enterprises stood at Tk 4,325 crore, according to the data from the finance ministry.
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