NDB Capital to launch new products

NDB Capital to launch new products
Second Commercial Paper in the offing, the company MD tells FE
FE Report
NDB Capital Ltd, a merchant bank, is thoroughly working to bring a number of investment banking products as the long term funds to finance the industries in Bangladesh.”We mainly focus on investment banking products as the demand for such long-term funds notably increased in the ‘enlarged’ Bangladesh market because of their feature to reduce the firms’ financial cost,” Qazi G.R. Arif, managing director & CEO of NDB Capital Ltd, told the FE in an interview recently.

Mr Arif laid stress on the need for developing the market of bond, one of the major investment banking products, in Bangladesh, reducing pressure on the money market too.

For such a market in Bangladesh, he also emphasised on doing enough researches about it, creating awareness, sharing of knowledge and making the law market-friendly.

“The investment banking products will have to be structured as attractive for the entrepreneurs and at the same time the investors get good returns,” Mr Arif said.

To structure the products in that attractive way, NDB Capital is now doing researches with the experiences and knowledge from its Sri Lankan parent company, specialised in project finance banking.

“To match the both sides is the main task,” he said, adding that “That’s why knowledge sharing is significant to structure the products. NDB Capital is doing so from its experiences in Sri Lanka, where the market is more developed, though smaller in size than that of Bangladesh.”

NDB Capital Ltd, a Sri Lanka-Bangladesh joint venture and subsidiary of National Development Bank (NDB) PLC of Sri Lanka, is a full-fledged merchant bank licensed by the Bangladesh Securities and Exchange Commission (BSEC). The Sri Lankan bank in 2009 purchased majority shares of NDB Capital, formerly known as Capital Market Services Ltd, locally formed in 1995.

NDB group commenced the NDB Investment Bank, leading investment bank in Sri Lanka, in 1996. NDB Capital is an extension of the investment banking operation of NDB Investment Bank in Bangladesh, officials said.

As the size of Bangladesh economy and industries remarkably augmented, Mr Arif said, longer-term loan products (like 10 years) is needed to finance those industries. The products include: bond, foreign currency loan, Sukuk (Islamic bond), commercial paper etc.

Mentioning that many opportunities for the individual investors to invest in the stock market in Bangladesh till now, Mr Arif said that the individual investors’ low awareness level couple with the merchant banks’ insufficient knowledge increased the chance of manipulation in the bourses in the past unfortunately

Reiterating the need for researches and knowledge sharing for proper portfolio management and other services, he said, “That’s why it is now doing researches massively to equip itself better for going forward.”

After necessary researches on the capital market, macro economy and money market etc, it will go for investment on behalf of the investors especially high network individuals, he said.

“We are now working to develop a well-equipped ‘dealing room’, from where we can capture all information of the customers, trading issues, and also do research,” he said, adding that “Hopefully, we will be ready with the dealing room by the middle of next year,” the MD said.

Right now, NDB Capital is focusing on advisory business, and investing very low.

The product range offered by the NDB Capital includes equity offerings, equity private placements, structuring and placement of corporate debt securities/ securitisations/ covered bonds, arranging syndicated loans, underwriting, portfolio management and corporate advisory services such as share valuations, balance sheet restructuring, mergers and acquisitions, and feasibility studies.

Regarding the Commercial Paper, a low-cost alternative to bank loans, he said that it is an effective product to give an opportunity to the corporate and individuals to invest here. Till now, only a leading private commercial bank (EBL) launched such product. “We are now working with Shanta Properties to bring the product in Bangladesh market.”

Commercial Paper is a promissory note with a fixed maturity of 1 to 365 days issued by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation’s promise to pay the face amount on the maturity date specified on the note.

Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price.

“We are also working on an Islamic commercial paper and two Sukuk for the long and short terms. The Shariah-based product is basically an alternate and effective mode of funding that always helps to give flexibility to the customers,” he said.

In the last year, he said, NDB Capital successfully arranged funds for two major power projects with innovative structures, and raised funds for a renowned steel manufacturing company via a first of its kind bond in the Bangladesh market.

“Despite political instability and uncertainty, NDB Capital managed to end the year 2013 successfully boasting a variation of deals in its portfolio,” he said.

The NDB Capital’s knowledge sharing will be much smoother, if strategic alliances could be formed with investment banks in India, China, Thailand and Vietnam, Mr Arif added.