The securities regulator has allowed LankaBangla Finance to issue its fourth zero coupon bond worth Tk200 crore.
The publicly listed non-bank financial institution (NBFI) will use the money to lend to individuals, corporates and small and medium enterprises.
The discount rate of the privately placed, non-convertible, fully redeemable, unsecured bond will be between 9% and 10%, according to the Bangladesh Securities and Exchange Commission.
Unlike coupon-bearing bonds, where investors pay the principal and enjoy periodic interests until the issuer pays back the principal at maturity, zero-coupon bonds are issued at a discounted price and investors get back their principal amount with interest in equal instalments till the predetermined period.
For instance, investors can buy each unit of LankaBangla’s fourth zero coupon bond at Tk8.33 lakh and the principal amount plus interest will be paid back in six equal half-yearly instalments as the portion of the bond will be redeemed.
Zero coupon bonds are already popular among educated investors due to tax exemption the government offers against the income from the instrument.
Other than banks, NBFIs and insurers, income of any individual or corporate from zero coupon bonds is tax-waived in Bangladesh.
A corporation which pays around 40% tax on its net income will find the effective return from LankaBangla’s fourth zero coupon bond at a rate higher than 13%.
The bond will be issued to institutional and high net worth individual investors.
Green Delta Capital will be trustee and the issuer itself will be the arranger of the bond.
The privately placed instrument will be tradable on the Alternative Trading Board of the bourses.