Rupali Bank to boost paid-up capital with govt fund adjusted new shares

Rupali Bank is going to issue ordinary shares worth Tk 6.80 billion against funds received from the government earlier as share money deposits.

The lone listed state-owned bank will issue 453.33 million shares of Tk 15 each with a premium of Tk 5 per share in favour of the secretary of the Finance Division.

The bank called an extraordinary general meeting (EGM) on August 27 to get approval from shareholders. The record date is July 21, according to a stock exchange filing on Monday.

The issuance of shares is also subject to the approval of the Bangladesh Securities and Exchange Commission (BSEC).

Following the disclosure, Rupali Bank's stock dropped 1.14 per cent to Tk 17.4 per share on Monday on the Dhaka Stock Exchange.

A share money deposit is the money paid in exchange for shares that have not been acquired yet. Over time, the bank has taken money from the government for smooth operation since its inception in 1986. Still, it is facing a huge capital shortage.

The outstanding amount of share money deposits is Tk 6.80 billion as of March this year, according to latest financial statements.

With the issuance of ordinary shares, Rupali Bank's paid-up capital is set to surpass its current authorised capital of Tk 7 billion. However, the finance ministry has already given permission for increasing the bank's authorised capital to Tk 25 billion.

Md Sajedul Islam, managing director of Shyamol Equity Management, said the existing shareholders' return on investment would be slashed after the issuance of new shares as the number of outstanding shares would increase.

Hence, earnings will be diluted and dividend payout capacity will be reduced, he said.

Of the funds, Tk 4.53 billion will be added to the bank's paid-up capital, with Tk 2.27 billion received as premium. So, the paid-up capital will increase to Tk 9.41 billion from the existing Tk 4.88 billion.

Currently, the company's number of shares is 488 million, which will go up to 941 million after the issuance of new shares.

The government holds a 90.19 per cent stake in the bank, while institutes and the general public hold only 9.81 per cent stakes as of May this year.

The bank will issue shares against government funds to comply with a five year-old regulatory order. In a 2020 gazette, the Financial Reporting Council (FRC) directed state-run entities to convert share money deposits into capital against the backdrop of such funds piling up in huge amounts with them.

The directive was issued because the government had been and is still deprived of dividends in return for its equity investment.

Financial performance

The bank's consolidated quarterly profit plunged 71 per cent year-on-year to nearly Tk 66 million in January-March this year.

Its annual profit had also fallen 82 per cent year-on-year to Tk 112.20 million in 2024. The bank saw a massive provision shortfall of Tk 153.75 billion last year following a sharp increase in classified loans.

Due to the huge provision shortfall, the bank could not declare any dividend for 2024. As per a Bangladesh Bank directive, banks that have failed to keep adequate provisions or opted for deferral facilities are prohibited from distributing dividends.

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