A 72-hour bidding process to fix the share price for the initial public offering (IPO) of Lub-rref (Bangladesh) Ltd will begin on October 12.
The bidding – a requirement for going public under the book-building method – will take place between 5pm on October 12 and 5pm on October 15 on the Dhaka Stock Exchange, said Moshiur Rahaman, company secretary of the local lubricant manufacturer.
According to the book-building process rules, qualified institutional investors will bid to set a reference price for Lub-rref shares and later the general public will apply for the same at a 10% discount.
Previously, on August 20, Lub-rref received approval from the stock market regulator to explore the price of its primary shares in an IPO under the book-building method.
The local lubricant manufacturer is due to use the Tk150-crore IPO fund to install new machinery at its plant and repay some of its expensive bank loans.
The cost of the IPO process will also be met by the funds due to be received from public investors, said the Bangladesh Securities and Exchange Commission (BSEC).
The lubricant manufacturer will invest Tk98 crore to expand its existing manufacturing plant, which would enable the company to capture 20% market share, from the existing 8%, according to Lub-rref's IPO prospectus.
Currently, BNO Lubricants – a brand of the company – sells around 10,000 tonnes of lubricants annually for Tk175 crore, said a company official.
Bangladesh's lubricant market, with an average 5% growth, has now risen to an annual demand of 1.2 lakh tonnes, and the annual turnover is around Tk6,000 crore, the prospectus added.
Incorporated in 2001, the company commercially launched its manufacturing plant in 2006.
Currently, 60% of Lub-rref's lubricants are made of responsibly recycled lubricants, while the remaining 40% are made out of imported base oil – the key raw material for lubricant.
The repayment of expensive bank loans of Tk46 crore from the IPO fund would help the company reduce its finance cost. A total Tk6 crore is being spent on the public offering process.
As of the fiscal year that ended on June 30, 2019, Lub-rref earned Tk2.08 against each of its shares, while the five years' average earnings per share were Tk2.23.
The net asset value per share of the company, with Tk100 crore paid-up capital, was Tk31.92 a year ago; it would be Tk25.96 without adding the revaluation surplus of assets.
NRB Equity Management is working as the issue manager to facilitate the stock market listing of the company.