Individual investors are now showing interest in preference shares as reflected in the closing of a debt instrument subscription.
People familiar with the development said high returns and tax benefit were the main reasons for the interest.
The City Bank has recently issued preference shares to raise Tk 1.49 billion (149 crore) for two power projects -- Confidence Power Bogura Unit 1 and Unit 2. Individuals invested in 23 per cent shares and institutions 77 per cent.
Preference shares are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued.
Most preference shares have fixed dividends on a yearly basis, and in such investment, the investors get priority if the company goes into liquidation.
The City Bank Capital Resources Limited, a merchant bank, was the arranger of the fund.
The rate of dividend for the Unit-2 is 12 per cent and for the Unit-1 is 10.5 per cent, according to the fund arranger.
"This is a good sign that the individual investors are showing interest in such types of debt instruments," said Ms. Tumpa Barua, unit head of the fund arranger and the trustee.
It has a tax benefit also as only 20 per cent withholding tax is applicable, according to her.
"We are happy over the recent trend of investment. But we need to create more awareness to increase the number of individual investors investing in such debt tools," she added.
The City Bank organised a programme to close the subscription on Thursday last.
The power project has a debt-to-equity ratio of 70:30. It issued preference shares accounting for only10 per cent.
Meanwhile, MTB Capital has launched subscription of Impress Composite to raise Tk 900 million through preference shares. The subscription will continue until March-end.