City Group brings beleaguered Rahima Food back to life
Rahima Food Corporation is all set to get back into operation from Thursday, 17 February, after a multi-year break, bolstered by an investment by the City Group – a leading consumer goods manufacturer in the country.
The business conglomerate acquired the 37.38% sponsor-director portion of shares in Rahima Food and took over the control of its board of directors.
Rahima Food has been out of production since 2013 after a drop in demand for its products in the market.
It will be able to run operations at full capacity after changing the nature of its business – from refined edible oil to coconut oil.
In a 15 February stock exchange filing, the company said, in addition to producing coconut oil, it will also do bottling and marketing of soybean and mustard oil.
Also, the company will set up a manufacturing plant for the processing and packing of cashew nuts for home and abroad.
Following the disclosure, its share price rose by 2.27%, or Tk8.1, to Tk365.6 from the previous trading session.
Although the company has not been in production for years, its share prices soared significantly from Tk296 in December to Tk365.6 on Tuesday.
In January last year, Rahima Food had earlier set a target to resume production by June, but it could not meet the deadline as the Covid-19 pandemic delayed its machinery imports from China.
According to sources in the company, City Group has five directors, including its chairman, on Rahima Food's board from 2017. It also had an independent director since then.
The company used to produce edible oil and vegetable ghee in its refinery, but the new management, dominated by the City Group, decided to set up the coconut oil plant, changing its business nature and commodity.
Shahidur Rahman, the chief financial officer of Rahima Food Corporation Ltd, told The Business Standard, "To come into production finally, we have completed all preparations including setting up the factory and the installation of machinery."
"The management has invested around Tk11-12 crore here," he added.
Rahima Food Corporation was incorporated in 1990 as a private limited company, and in 1997, it entered the share market through an initial public offering (IPO) and got listed in the food and allied sector. Its paid-up capital is Tk20 crore.
But on 19 July 2018, the Dhaka Stock Exchange (DSE) delisted its share trading because the company was not in operation for a long time.
Again it relisted on the stock exchanges in 2020, its share trading resumed under the "A" category after a break for more than two years.
Rahima Food's financials
As the operation was halted, the company had incurred a loss, and its retained earnings became negative.
In FY20, the Rahima Food Corporation had incurred a loss of Tk2.40 crore, and after one year in FY21, it posted a profit of around Tk14 lakh from investment in banks.
Based on the profit, it approved a 1% cash dividend for its shareholders except for the sponsors and directors.
As the company is not in operation, in the first half of the current fiscal year, it incurred a loss of Tk0.03 per share compared to earnings per share of Tk0.08 a year ago.
In the final three months of 2021, it suffered a loss of Tk0.07 per share from Tk0.03 profit in the previous year.
Marico Bangladesh is the market leader with an 80% market share of the hair oil industry.
Besides, foreign brands Dabur and Emami also dominate the market. According to the market insiders, the domestic market size stood at $41.3 million in 2019 and is expected to grow by 5.5% to $54 million by 2025.
