Local electromechanical conglomerate Energypac Power Generation Ltd has received the securities regulator's nod to issue primary shares worth Tk150 crore.
Following the eligible institutional investors' (EII) bidding, the company will now proceed to invite subscriptions from general investors.
The Bangladesh Securities and Exchange Commission (BSEC) on Wednesday said the company has to issue over 40 crore shares to collect Tk150 crore in its initial public offering (IPO) under the book building method.
Of the primary shares, nearly 20.15 crore shares would be issued to EIIs at their own bidding price, although EIIs, collectively, have set the ultimate cut off price at Tk35 against the face value of Tk10 for each share.
The cut off price in a book building IPO is the price point where EIIs collectively swallow all the supplies dedicated for them.
In the upcoming IPO subscription, general investors – including non-resident Bangladeshis – will be able to apply to buy the shares at a 10% discount.
The company would primarily expand its liquefied petroleum gas (LPG) business with the IPO fund. It would also repay some expensive bank loans and bear the IPO expenses using the investors' money.
As of 30 June, 2019 net asset value against each Energypac share was Tk45.15, which was Tk30.20 if the asset revaluation surplus was not considered.
The weighted average earnings per share (EPS) for the last five years was Tk2.21.
LankaBangla Investments Ltd, a leading local merchant bank, is working as the issue manager of Energypac to help the company get into the bourses.
The company's business divisions
Energypac began its journey in 1995 as an electrical and engineering business. The company now consists of seven different divisions, according to an equity analysis report by brokerage firm, United Securities.
Its energy and power division supplies generators and provides operations, maintenance and installation services.
The motor vehicle division of the company imports, assembles and sells branded commercial vehicles and agro-machinery.
Its LPG brand, G-Gas, currently hovers between sixth and eighth position in terms of market share in Bangladesh's LPG market.
Meanwhile, Bangladesh Brand Forum considers G-Gas as one of the top-three LPG brands in the country from a brand equity perspective.
PowerPac, the pre-engineered building and steel structure brand of the group, is also gaining market momentum.
Power, motor vehicle and LPG are the top three revenue earners for Energypac earning 70% of its Tk1,440 crore revenue last year.
Power generation is the biggest business for Energypac in terms of revenue. The earnings of three of its power plants constitute 36.7% of the company's annual revenue.
The expansion plan
Most of the investors' funds would be used by Energypac to build a satellite station – popularly known as a daughter station – at Rupganj, Narayanganj with a storage capacity of 1,200 tonnes of LPG.
Given that Energypac will use a riverine route to carry the bulk of the LPG from its Khulna base to Narayanganj, and subsequently bottle it at a strategic location, the Rupganj station is anticipated to offer the company a cost and supply chain advantage.
It will also support the increased scale – from the existing 5,400 tonnes to over 6,000 tonnes – by adding to its existing set of cylinders and other ancillaries.
Energypac has also received approval to set up 300 LPG refuelling stations nationwide and it has already entered into an agreement with the state-owned Padma Oil Company for 100 stations.