Assembler of Ashok Leyland commercial vehicles Ifad Autos, which has also established joint ventures in food and lubricant segments, is going to increase investment in its food products business.
In a stock exchange filing on Sunday, the publicly-traded automobile company announced that, of the planned Tk300 crore to be raised through bonds, it would invest Tk225 crore to double its stake at the associate firm Ifad Multiproducts Ltd and the remaining Tk75 crore would be used as its own working capital in the automobile business.
Taskeen Ahmed, director of Ifad Autos, told The Business Standard, "Following the expansion in the automobile and relevant businesses over the recent years, his company was looking for a diversified revenue stream for the coming years and the food products business has the maximum growth potential."
Last year, Ifad Autos acquired a 40% stake in its sister concern Ifad Multiproducts Ltd at Tk80 crore and this year the Bangladesh Securities and Exchange Commission (BSEC) allowed the company to raise Tk300 crore from investors through issuing bonds.
To support the leveraged investment, the regulator granted Ifad Autos exemptions from complying with certain clauses of Debt Securities Rules that do not allow the diversion of bond proceeds to associate companies.
Ifad Multiproducts is going to be a subsidiary of Ifad Autos as 80% of its post-investment shares would be held by the public company, said Taskeen Ahmed.
In its 15 years in the business of flour, cookies, noodles and some other food products, IFAD has emerged as a strong brand because of its quality commitment, he said, adding that the products are being exported to over 25 countries including some in Europe and North America, while the domestic market also welcomed the products.
"However, the growth has been moderate and it is time to let the business grow faster," he said.
Taskeen who led Ifad Autos' transformation to a vehicle assembler, body manufacturer and joint venture partner of Gulf Oil International, from a distributorship in the last decade has already stepped down from Ifad Auto's managing directorship and taken over the helm of the food products business.
Having an annual revenue of Tk500-600 crore, Ifad Multiproducts is a profitable company, according to Taskeen Ahmed.
"We have a six-seven year expansion plan for Ifad Multiproducts so that it acquires a fair share of the fast-growing local market alongside extending its export markets."
With the fresh capital, Ifad Multiproducts would have a BMRE of the existing plants in the north part of Dhaka city, would set up new cookie plants with European machinery, and also some other lines for new products.
Some of the capital would be used to pay back Ifad Multiproducts' bank loans for the sake of its balance sheet strengthening, the managing director added while sharing his plans.
The entire expansion plan is subject to Ifad Autos shareholders' approval in the company's 34th annual general meeting scheduled for 18 December.
Ifad Autos went public in 2015 and achieved several milestones including Tk1,500 crore in annual revenue and over Tk150 crore in net profit in fiscal 2017-18.
However, the truck market slowdown in the following year, followed by the pandemic and the macroeconomic turbulence this year, did not allow the company to bounce back to the peak level.
Due to the massive foreign currency losses, Ifad posted losses in the July-September quarter this year, despite the fact that the company had revenue growth due to its market leadership in the bus segment that saw continued demand after the Padma Bridge opened new routes through connecting south-western Bangladesh with the capital at the end of June this year.
Ifad Autos shares closed at the floor price of Tk44.1 in the Dhaka Stock Exchange on Sunday.