A dozen companies are planning to raise around Tk700 crore funds from the capital market through initial public offering (IPO). They intend to go for business expansion with the new capital infusion.
The business entities are choosing the stock market for sourcing finance at a time when bank money has become costlier amid liquidity crunch.
Most of the fund raisers are small companies that are trying to recover from pandemic-induced losses but finding it difficult to get bank financing.
But, some big groups are also planning to raise funds from the stock market aiming to gain reputation for their subsidiaries and attract foreign investors.
For instance, Partex Group, one of the largest conglomerates in the country, is hunting for foreign investments for its affiliate company Partex Cables to set up a backward linkage industry that will supply raw materials for manufacturing cables.
It will be the first backward linkage industry for cable manufacturing in the local market.
The business group is currently in talks with some Japanese investors, who will provide technical assistance to Partex Cables to process the raw materials of cables.
"As part of this plan, the company will be listed on the stock market to enable foreign investors to evaluate the company before making investments," said Rakib Ahmed, chief financial officer of Partex Cables Limited.
Partex Cables, a leading manufacturer in the cable industry, plans to raise Tk30 crore under the fixed price method by issuing three crore shares at face value.
The company is yet to make a formal application to the Bangladesh Securities and Exchange Commission (BSEC).
Another big name, DBL Group is planning to list one of its affiliate companies Dulal Brothers in the stock market to raise Tk30 crore.
A top manager of the business group with an annual turnover of $870 million, told The Business Standard that they currently have two dozen companies and are planning to bring more of them to the stock market to increase acceptance among the foreign investors.
At present, only one company of the DBL Group – Matin Spinning – is listed with the Dhaka Stock Exchange (DSE).
The group is also yet to make a formal application for IPO to the BSEC.
Other big companies include Best Holdings and Islam Oxygen Limited, which will raise Tk350 crore and Tk93 crore respectively from the capital market through the book building system.
Both companies have already submitted their applications for IPO to the BSEC.
Nurul Islam, managing director of Islam Oxygen Limited, a local producer of medical, industrial, and laboratory gas, said, "The expansion will help Bangladesh be self-sufficient in the increasingly needed medical and industrial gases and reduce the foreign dependence."
He added that his company may also export the gas after meeting local demand.
Amin Ahmed, chairman of Best Holdings, told The Business Standard, "We will use Tk176 crore of the fund for construction and other civil works at Le Méridien hotel, Tk115.60 crore for the repayment of existing liabilities, and the rest for acquiring local machinery and equipment."
He said after the Covid-19 pandemic the number of guests increased significantly thanks to the hotel's close proximity to the airport.
Previously the company had problems with loan repayment with various government banks and it converted the debt into equity through bonds, he said.
Among the small ventures, five companies will raise around Tk50 crore from the SME Platform, which was introduced in 2019 to attract businesses with small capital bases to the stock market and help them raise capital.
Ten firms have raised Tk112 crore through the SME Platform so far since its debut, opening up a new window for funds for the SME entrepreneurs.
Investors with a portfolio of above Tk30 lakh in the secondary market can participate in the IPO in the SME Platform.
Of the small companies MK Footwear Ltd will raise Tk10 crore, Glorious Crop Care Limited Tk11.50 crore, Subra Systems Ltd Tk10 crore, Al-Madina PharmaceuticalsTk5 crore, and Agro Organica Plc Tk10 crore through the SME Platform of the stock market.
Six other growing companies have applied to the BSEC for raising more than Tk170 crore from the main market through IPO to expand their business.
Of the companies, Classic Foils will raise Tk30 crore, B Brothers Garments Tk50 crore, Rhymer Chemical Tk30 crore, Sikder Insurance Tk16 crore, Eshana nonwoven fabrics Tk30 crore and Trust Islami Life Insurance Ltd Tk16 crore through fixed price method.
"From the long-term perspective, a bank loan is not a positive sign for us because of its high interest rate. So, we have decided to go to the capital market," Md Maftun Haque, managing director of the Eshana Non-woven Fabrics, told TBS.
Eshana manufactures a wide range of non-woven fabrics which is used for making PPEs, masks, non-woven bags, cushion covers, and garment accessories, according to the company.
"The business expansion plan was taken a few years ago but we could not execute it due to Covid-19," said Haque.
He said, "Four years ago, we started exporting to the European market. Now, we are exporting to four countries including the USA."
He said such businesses are growing in emerging countries including Bangladesh as the labour cost in China is high after the pandemic.
Md Maftun Haque expects that their production capacity will increase by 60% and 200 new jobs will be created once the company successfully executes the expansion plan.
"The capital market is a perfect place for long term financing instead of banks," a top BSEC official said, requesting anonymity.
"Many firms are interested in expanding their business through the capital market and it will also lessen their dependence on bank loans," the official added.