Loss-hit ICB introduces first-ever policy to value Tk14,983cr portfolio

The Investment Corporation of Bangladesh (ICB) has introduced its first-ever securities valuation policy to determine the fair value of its Tk14,983 crore investment portfolio, as the state-owned investment institution grapples with mounting losses and a severe financial crisis.

The new policy aims to improve financial transparency and reduce the risk of overvaluation or undervaluation of assets, particularly its substantial holdings in non-listed securities whose fair values had not previously been systematically assessed.

"As ICB currently faces a severe financial crisis, an initiative has been taken to assess the fair value of these assets, something that was never done before," an ICB official told The Business Standard on condition of anonymity.

The state-owned investment banker has long served as a key institution in advancing industrial growth and deepening its capital market.

From its inception, ICB has provided crucial institutional support to capital-starved firms through underwriting, bridge loans, and equity-backed financing.

Over time, it broadened its scope to encompass pre-IPO placements, debentures, equity participation, bonds, and leasing, alongside active portfolio management in the secondary market.

Despite its expansive presence across listed and non-listed assets, ICB lacked a standardised policy to determine fair market value.

This regulatory gap frequently exposed its annual financial statements to the risk of overestimating or underestimating investment values.

According to International Financial Reporting Standards (IFRS) 13, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Essentially, it's an exit price from the perspective of a market participant, considering current market conditions.

As of June 2025, ICB's total investment portfolio stood at Tk14,983 crore. Of this, Tk365.35 crore is allocated to government securities, while Tk14,617 crore is invested in other market assets.

Non-listed securities account for Tk1,100 crore of its total exposure with the substantial amount in mutual funds Tk894.34 crore, preference shares Tk149.50 crore and Tk53 crore in Ordinary Shares.

Currently, the ICB is struggling to stay afloat due to poor investment choices, severe portfolio erosion driven by market volatility, and a heavy debt burden incurred while supporting the capital market, factors that have dragged the once-profitable institution into crisis.

The situation is so dire that the institution failed to repay funds borrowed under a government sovereign guarantee upon maturity, prompting the government to extend the repayment deadline by another three years.

Furthermore, it is unable to service the interest on loans taken from state-owned banks for stock market investments.

Meanwhile, ICB lost about one-third of the money it borrowed from the government, state-owned banks and investors after years of supporting the stock market, leaving it under severe financial pressure and prompting a fresh appeal for government assistance. ICB reported a net loss of Tk1,214 crore in FY25, forcing it to skip dividend distributions.

The financial stress has persisted into the current fiscal year, with the corporation incurring an additional loss of Tk588 crore through March 2026. As a result, ICB's retained losses have ballooned to Tk1,609 crore.

Requesting anonymity, an ICB official said, "For many years, ICB provided financial assistance to entrepreneurs to support the country's industrialisation. It invested in both listed and non-listed companies. Under those circumstances, investments were made in numerous non-listed firms, but the fair value of these assets was never determined. As ICB currently faces a severe financial crisis, an initiative has been taken to assess the fair value of these assets, something that was never done before."

He added, "The current board is adopting various plans to restructure and save ICB. Initiating the fair value assessment of assets is a key part of these efforts."

The newly introduced framework aligns asset assessments with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), said in the valuation policy.

It establishes clear valuation criteria across both listed instruments such as equities, debentures, bonds, and mutual funds and non-listed holdings, including preference shares, underwriting securities, and unlisted funds.

To operationalise the policy, ICB has set up a seven-member valuation committee. Operating under specific terms of reference, the committee is tasked with determining accurate market values and submitting quarterly reports directly to the board of directors.

As per valuation techniques, the listed securities valuation method will be the closing price on the reference date at the stock exchanges.

If a listed security has not been traded for the last 6 months, its fair value will be determined using the non-listed securities valuation method.

For unlisted or delisted securities, or those with no trade history in the last 6 months, the valuation committee will determine the fair value using net asset value (NAV) approach derived from reviewing the latest auditor's report.

To deal with non-performing fixed-income holdings, the policy introduces a progressive write-down mechanism for bonds, debentures, and preference shares when scheduled principal or interest or dividend payments fail.

Under these guidelines, investments maintaining regular recoveries are carried at purchase cost as their fair value.

However, if recovery remains uncollected for one year, the fair value is marked down to 75% of the purchase cost, falling to 50% after two years, and written down entirely to zero if default persists beyond three years.

Furthermore, the framework strictly prohibits recognising uncollected interest or dividend income from non-listed securities on an accrual basis, mandating that such returns cannot be booked as income without actual cash realisation.