Mir Akhter Hossain looks to cut finance cost by issuing preference shares

Mir Akhter Hossain Ltd is going to raise Tk 2.50 billion through preference shares to repay its high-cost bank loans to ease the finance cost burden.

The board has decided to pay off its high-cost short-term loans partially with funds to be collected through preference shares, said an official of the company, requesting anonymity.

Mir Akther's short-term debts amounted to around Tk 3.48 billion while long-term loans Tk 14.70 billion as of September this year.

The company's finance costs shot up in recent quarters, eroding its profits, due to rising interest rates.

Its board of directors at a meeting on Saturday decided to issue preference shares subject to approval of the shareholders and the Bangladesh Securities and Exchange Commission.

Preference share, also known as preferred stock, is an exclusive share option which enables shareholders to receive dividends announced by the company before the equity shareholders.

Preferred shares typically pay steady dividends, while common stocks only pay dividends when approved by the board of directors based on financial performance of the firm.

The nature of preference shares will be cumulative, non-participatory and fully redeemable.

That means, on maturity, the company will repurchase its shares from investors and will be liable to pay shareholders outstanding dividends in arrears.

Owing to the shares being non-participatory, shareholders of the stocks will not be entitled to any surplus profit other than the promised dividends.

To receive shareholders' approval, the company will hold an extraordinary general meeting (EGM) on February 8 next year. The record date is January 14.

Interest rate has been in an upward momentum since the government removed the ceiling on the lending rate in July last year. The rate further rose when the government stopped controlling it and left it to the market in May this year.

Subsequently, the weighted average lending rate meant for the SME sector went up to 12.1 per cent while the lending rate for the large industries moved up to 11.86 per cent by October this year, according to the Bangladesh Bank.

With the rise in interest rates, the company's consolidated profit plunged 25 per cent year-on-year to Tk 24.15 million in the quarter through September this year.

Its annual profit also dropped 25 per cent year-on-year to Tk 300.43 million in FY24, while turnover declined almost 14 per cent to Tk 2.69 billion in the year compared to the previous year.

The board declared a 10 per cent cash dividend for FY24, down from 12.5 per cent for FY23.

Mir Akhter started its journey in the field of construction industry in 1968.

It has continued to hold a unique place in the engineering and construction sector, building roads, bridges, highways, railway tracks, airports,

5-star luxury hotels, factory buildings, and other complex infrastructural projects.

In 2021, the company got listed on the stock exchanges by raising Tk 1.25 billion under the book-building method for business expansion and to repay bank loans partially.

The IPO funds were supposed to be utilised within 18 months -- by July 2022.

However, the company completed its use of IPO proceeds by September last year, upon regulatory approval.

In March 2022, the securities regulator also allowed the company to raise Tk 2.5 billion through zero coupon bonds to refinance high-cost debts and increase capital equipment.

Meanwhile, the stock market regulator last month formed a panel to review the utilisation of funds raised through the IPO and zero-coupon bonds.

The three-member panel, formed on November 27, will inspect the company and submit its report to the commission within 60 working days, according to a BSEC official.

The panel is to make a physical visit to the company premises, as per the new commission's order.

Stock Performance

Meanwhile, the stock of Mir Akhter Hossain closed at Tk 31.60 per share on Sunday on the Dhaka Stock Exchange, losing 0.63 per cent from the day before.

The current market price is far below the issue price of IPO shares at Tk 54 each.

The stock's cut-off price was Tk 60 per share and general investors got a 10 percent discount on the cut-off price.

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