Baraka Patenga Power Limited, which recently had its initial public offering (IPO) application approved, is due to invest Tk144.34 crore in its two subsidiaries.
The two companies are Karnaphuli Power Limited and Baraka Shikalbaha Power Limited. Both are already in operation, and their main activity is to generate and supply electricity to the national grid.
Karnaphuli Power has set up a 110MW heavy fuel oil-based independent plant while Baraka Shikalbaha has built a 105MW plant of the same type.
Baraka Patenga, which holds 51% of the shares of Karnaphuli Power and Baraka Shikalbaha, will raise capital under the book-building method.
In December last year, Bangladesh Securities and Exchange Commission (BSEC) approved the company's IPO application to raise Tk225 crore from the stock market.
After investing in the two subsidiaries, the rest of the funds will be used to repay bank loans and bear the expenses of the IPO process.
"Our mission is to become the largest power generating company in the private sector. We intend to play a big role in the government's target to ensure electricity for all by 2021 by setting up more plants across the country," said Gulam Rabbani Chowdhury, chairman of Baraka Patenga.
The bidding to set the cut-off price of the company's shares is due to begin on 15 February for 72 hours. Retail investors will get the shares at a 10% discount.
"The lion's share of the IPO fund will be used for equity investment in Karnaphuli Power and Baraka Shikalbaha – to settle the deferred obligations for genset procurements," Rabbani said.
"Both the companies, otherwise, would have to look for alternative sources of financing to meet these obligations, which could be much costlier and result in lower profitability," he explained.
In the 2019-20 fiscal year, the company earned Tk67.4 crore in profits, up by a staggering 123.9%.
Baraka Patenga's profitability will increase after its long-term debts are repaid with the IPO proceeds, said Rabbani.
The principal activity of Baraka Patenga is to set up power plants to generate and supply electricity. Its 50MW plant in Chattogram's Patenga started commercial operations on 4 May, 2014.