BSEC clears Bangladesh Finance's move to confiscate Navana CNG shares
Navana Limited, an affiliate of Navana Group, had pledged 20.75 lakh shares of its sister concern Navana CNG Limited to obtain loans from Bangladesh Finance.
Bangladesh Finance PLC, a listed non-bank financial institution, has received regulatory approval to confiscate shares of listed Navana CNG Limited that Navana Limited pledged as security for defaulted loans.
Navana Limited, an affiliate of Navana Group, had pledged 20.75 lakh shares of its sister concern Navana CNG Limited to obtain loans from Bangladesh Finance.
The company had been availing credit facilities from Bangladesh Finance since 2014. According to documents submitted to the Bangladesh Securities and Exchange Commission (BSEC), the lender initially approved term loan facilities of Tk10 crore and later Tk20 crore, along with additional facilities of Tk12 crore and Tk15 crore subsequently.
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The loans were disbursed to Navana Limited, Navana Construction Limited and Aftab Automobiles Limited through Bangladesh Finance's principal branch.
The borrower's repayment performance was initially satisfactory. However, the accounts began accumulating significant overdue amounts from 2020.
Following the customer's request, the loans were restructured in 2020 and 2021. Although some instalments were subsequently paid, repayments remained insufficient and the accounts again became overdue. The loans were rescheduled again in 2023 and 2024.
According to Bangladesh Finance, negotiations with the borrower continued, but the company failed to make sufficient payments. The lender subsequently classified the loans.
The lender said the total outstanding amount currently stands at Tk53.87 crore, of which Tk29.76 crore is overdue.
As the loans became classified, Bangladesh Finance had to make 100% provisions against the exposure, according to the company.
The lender applied to the Dhaka Stock Exchange (DSE) in June to confiscate the pledged shares. However, the request could not be approved because Navana CNG had been placed in the Z category.
Following a dividend declaration, Navana CNG was downgraded to the Z category after failing to distribute the declared dividend to shareholders. Under existing restrictions, the transfer or confiscation of shares of Z-category companies requires regulatory approval.
In the last week of August, the BSEC approved Bangladesh Finance's request to confiscate the pledged shares, according to a copy of the approval letter obtained by TBS.
Bangladesh Finance Managing Director Md Kyser Hamid told this newspaper the lender had been trying to recover the defaulted loans for a long time.
"Although we had applied to confiscate the pledged shares, it could not be done because of restrictions on the transfer of shares held by owners of Z-category companies. Finally, the current commission has approved the confiscation," he said.
He added that Bangladesh Finance had also filed a case with a money loan court, which is currently pending.
According to Bangladesh Finance's letter to the BSEC, the original 20.75 lakh pledged shares have increased to 22.87 lakh shares after the addition of 2.12 lakh shares received as dividends.
At Navana CNG's closing price of Tk20.30 on 8 September, the total value of the shares stands at around Tk4.64 crore.
The pledged shares are worth significantly less than the outstanding loan. Asked about the issue, Kyser Hamid said the loans were secured by the shares as well as personal guarantees.
"As the case is pending in court, once we obtain a verdict, there will be an opportunity to attach the personal assets of the company's owners," he said.
He said the confiscation of the shares would only partially adjust the liability.
"Like other banks and NBFIs, Bangladesh Finance deals with public money. We cannot wait indefinitely to recover the customer's money," the lender said in its letter to the BSEC.
The company also noted that the government is concerned about classified loans in the banking and NBFI sectors and that Bangladesh Bank regularly monitors its classified loans.
Kyser Hamid said Bangladesh Finance had already made full provisions against the defaulted loans.
"The most important point is that we have made 100% provision against the classified loans. If we recover the money now, the provisioned amount will be written back and added to the company's profit," he said.
Nafis Ahmed, company secretary of Navana CNG, could not be reached over mobile phone despite repeated attempts.
