Around 40 more IPO proposals have been submitted to the BSEC, of which, 10 are textile
- Employees work in a textile mill in Dhaka
Apparel companies have become dominant in the country’s initial public offering (IPO) market seeking funds to increase their production capacity and sales network.
Lower cost of fund and growing global presence of the sector have been mentioned by the analysts as reasons of the rising trend.
Of seven companies which has received IPO approval so far this year, three were textile, said Bangladesh Securities Exchange Commission (BSEC).
Last year there were three textile companies entering the IPO market while the number was four in 2012, one in 2011 and one in 2010.
Around 40 more IPO proposals have been submitted to the BSEC, of which, 10 are textile.
They include Keya Cotton Mills, Far East Knitting and Dyeing, Hamid Fabrics, MP Spinning Mills, Keya Spinning Mills, Dragon Sweater and Spinning, Fiber Shine, Royal Denim, Shasha Denims and Aman Cotton Fibrous.
Tung Hai Knitting and Dyeing Ltd is the latest textile company receiving BSEC approval and waiting to open its subscription soon.
The proceeds from its IPO will be spent to expand its production and financial capacities buying more machinery and strengthening capital base, among others.
There are more textile companies waiting to make debut in the bourses, which include Matin Spinning Mills, Mozaffar Hossain Spinning Mills and Hwa Well Textiles (BD). They are also planning to use their IPO proceeds in the enhancement of capacities.
“It is the lower cost of fund, the main reason why the textile firms feel attracted to enter the stock market instead of banks,” said Md Moniruzzaman, managing director of IDLC Investments Ltd.
“Most of IPO proposals were made two years ago when bank interest rate was much higher than now, and the companies opted for the cheapest way of having funds offered by the stock market.”
Md Moniruzzaman cited the increase of textile companies as another possible reason for the IPO proposals influx from sector.
“Despite many odds, Bangladesh’s apparel industry which accounts for 80% of the country’s total exports has been growing faster than any other sector. It requires funds to expand.”
According to Anwar-ul-Alam Chowdhury Parvez, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), banks’ higher interest rate has forced apparel companies to seek funds from the stock market for expansion.
About 36 lakh people work in the country’s clothing industry which is the world’s second-largest supplier of garment products after China. Destination of nearly 60% of the exports is Europe while 23% goes to the United States.
Of total 257 listed companies presently, the textile sector firms are 32. The number is the third largest of companies coming from a single sector.
The textile companies are the tenth in terms of market capitalisation.
As of February this year, the textile companies’ market cap stood at about Tk950 crore, which was 4% more than the previous session.
Source: Dhaka Tribune
