Most of the unit holders of Beximco Green Sukuk have shown reluctance in converting bonds into shares although four years have passed, fearing losses.
In a stock exchange filing on Tuesday, the Investment Corporation of Bangladesh (ICB), the trustee of the debt securities, said only 18 unit holders with bonds of Tk 28,903 had applied for converting sukuk into Beximco shares this year.
The trustee said applicants had a total holding of 640 sukuk bonds, of which 350 were converted into 420 ordinary shares of Beximco at Tk 82.58 each.
Sukuk bonds worth Tk 30 billion were issued in 2021. In the past four years, sukuk equivalent to Tk 1.91 billion were converted. This year sees the lowest conversion of the bonds, with the floor price still effective on Beximco shares in the secondary market.
Sukuk investors were allowed to convert 20 percent of their investments into Beximco shares each year. They are entitled to get a 25 per cent discount on the 20-day average trading price of Beximco shares. Unexecuted conversion rights can be exercised in the subsequent years.
Beximco share price has remained stagnant at the floor price - Tk 110.10 each. With the discount, sukuk holders will get Beximco shares at Tk 82.58 each, but investors fear a higher erosion of share price once the price restriction is removed.
The conversion appears not profitable right now as Beximco shares have already run out of buyers and are stuck at an inflated price, said Akramul Alam, head of research at Royal Capital.
The current market situation makes exit from sukuk difficult. Presently, the bonds are traded at Tk 56 each against the face value of Tk 100.
Beximco sukuk holders are receiving a guaranteed 9 percent annual return against the sukuk's face value of Tk 100 each. If Beximco's cash dividend for a year exceeds 9 per cent, sukuk offers additional payments, according to the bond's prospectus.
One-tenth of the percentage point excess that Beximco shareholders receive as cash dividends over the sukuk base rate is added to the sukuk's return.
Hence, the higher dividends Beximco shareholders receive, the higher return sukuk investors get. But Beximco suffered a loss of Tk 368 million in FY24 and declared no dividend. Beximco is yet to publish financial statements for FY25 after political changeover.
After the latest conversion, Tk 28.09 billion principal amount of sukuk remain in the market out of Tk 30 billion while five years tenure will expire in December 2026.
Meanwhile, the maturity period of the Sukuk has been proposed to be extended by up to six years to 2032, as repayment of principal to bondholders has become uncertain amid changes in the political climate.
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