Large groups, such as Akij, Beximco Group, Abul Khair, and Envoy, are now going to expand their businesses with foreign loans, signalling good times for Bangladesh's economy even at this time of global uncertainty caused by the ongoing Russia-Ukraine war.
This month at least 20 such companies have secured approval from the scrutiny committee of the Board of Investment, chaired by Bangladesh Bank governor, for getting loans to the tune of $352 million, equivalent to Tk3,275 crore, from different foreign banks and multilateral agencies.
Most business entities that got the go-ahead for external loans are the textile and spinning industries. Besides, there are companies from steel, power, food processing, plastics and ceramics sectors.
Some 11 companies will spend $326 million of the external loans approved on 5 June on importing capital machinery to implement their new investment plans, according to minutes of the loan scrutiny committee.
Besides, eight companies, which imported capital machinery with foreign loans to expand their business during the pandemic but could not make repayments on time, have now had their loans amounting to $25.43 million approved for maturity date extensions under refinancing facility.
Mobile operator Banglalink Digital Communication Ltd has obtained approval of $200 million in loan from the committee to improve its quality of services across the country.
Earlier the telecom operator said it had a plan to roll out 3,000 new base stations by the end of the current year to improve the quality of service across the country. It planned to invest around Tk4,870 crore in its network over the next 4 years to further improve and expand its service to cover more than 90% of the population nationwide and be fully competitive with the other two private mobile operators.
Banglalink will import capital machinery and equipment from China's ZTE Corporation, a global leader in telecommunication and information technology.
In April this year, the company secured a five-year syndicated term loan of Tk1,200 crore. In a statement earlier, Banglalink claimed that under the signed agreement it will utilise STE's best-in-class products and technology solutions to enhance its network capacity over the next five years.
VEON, the parent company of Banglalink, invested through foreign direct investment accumulated around $1 billion, which was one of the highest amounts since independence of Bangladesh.
According to the existing rules for borrowing from abroad, the debt-to-equity ratio has to be 70:30. Banglalink requested relaxing this ratio in the case of its $200 million loan, which was approved by the committee.
The scrutiny committee said Banglalink would take necessary steps to raise capital by selling shares to the public equal to at least 10% of its paid-up capital through initial public offering by December 2024.
Envy Textiles Ltd, a 100% export-oriented company, has secured permission to borrow $11 million from the Asian Development Bank to import capital machinery and equipment to increase its existing capacity.
Abdus Salam Murshedy, managing director at Envoy Group, told The Business Standard, "We have all the units, from spinning to yarn dyeing to fabrics. Our work orders have been on the rise as we have gained buyers' confidence in us with timely deliveries of products. So, we have taken initiatives to modernise and expand the existing units with the external loan and increase exports."
To cater for both local and foreign demands, RFL Electronics Limited, a sister concern of the Pran-RFL Group, has got approval to take out a loan of $23 million from the UK-based British International Investment PLC.
Kamruzzaman Kamal, director (Marketing) at Pran-RFL Group, told TBS, "Our group has initiated expansion of various units of RFL Electronics to increase production of electronics products, including mobile handsets, refrigerators, air conditioners to meet domestic and export demand."
But he could not specify units that will see expansion.
Bangladesh Export Import Company Limited, commonly known by its trade name Beximco, applied for a loan of €33 million from ING Bank of Germany, which was approved by the scrutiny committee. Beximco will repay €29.33 million of the loan to German supplier Textima Export Import GmbH. The rest will be paid to Euler Hermes AG as an export credit agency premium.
The loan will be taken for Beximco Group's textile composite (spinning, woven, denim, knit fabric dyeing and finishing), sewing and PPE manufacturing industrial enterprise, based in Gazipur's Kashipur.
The scrutiny committee of the board of investment has also approved Akij Ceramics Limited's application for refinancing of €9.08 million for the maturity date extension of its 18 bills.
Akij Ceramics, a concern of Akij Group, engaged in manufacturing tiles and sanitaryware, is situated at Trishal in Mymensingh.
In an application to the committee, Akij Ceramics said the company was going to increase its annual manufacturing capacity. Hence, it had opened a Usance Payable at Sight (UPAS) letter of credit to import capital machinery and also implement the project. Its estimated date of implementation would be delayed by approximately one year, but liability against UPAS LCs had been created. To match its cash-inflow with the term loan repayment schedule, one year extension of the UPAS tenor was needed.
Abul Khair Strip Processing Ltd got approval from the committee to amend its €22.5 million loan proposal of Saudi Arabia-based Islamic Corporation for the Development of the Private Sector (ICD). The loan was approved by the company in June last year.
Abul Khair Group said after getting foreign loan approval from Bangladesh Investment Development Authority (Bida), the company had communicated the approval with its lender ICD. The ICD also took the initiatives for commercial and legal due diligence and also appointment of the international and local legal councils, but the process of due diligence and finalisation of the documentation had taken a long time as a result of Covid-19 restrictions and its impacts on the personnel of the teams.
Meanwhile, the payment dates of the machinery became due and the company had to pay off all liabilities from its working capital on the due date to avoid financial defaults, it noted.
Besides, Ocean Knitwear Ind (pvt), Argon Spinning Ltd, Youth Spinning Mills ltd and Way Agro Industry Ltd got approval to get foreign currency loans for business expansion, while Matin Spinning Mills, Columbia Washing Plant Ltd, Banga Building Materials Ltd and Total Food Processing Pvt Ltd got approval of the proposed maturity extension.
Guarantors of companies that got approval for foreign loans include United Commercial Bank, Exim Bank, One Bank, Islami Bank Bangladesh Limited, Standard Bank and Brac Bank.
Ahsan H Manur, chairman at Brac Bank and executive director at Policy Research Institute, told TBS that Bangladesh's private sector foreign debt amounts to about $18 billion. There is a need for approving new loans for the expansion of private sector businesses.
In the current global situation, fresh investment in the private sector is definitely good news, which will boost exports as well as create employment, he noted.
"However, since our balance of payments is in deficit at the moment, it will be reasonable to allow foreign borrowing only for the expansion of export-oriented industries," he added.
Talking to TBS over the phone from Turkey, Bida Executive Chairman Md Sirazul Islam said in midst of a war and a recession, lies new business opportunities at home and abroad. So, businesses are planning for expansion to cash in on these opportunities.
Of course, they are making new investments with external loans, maintaining due diligence, he pointed out.