IFC to lend City Group $20m for its Tk1,000cr bakery project

The International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, announced to lend $20 million (around Tk175 crore) to City Group for its Tk1,000 crore greenfield bakery venture - Rupshi Foods Ltd.

With this project, City Group — an edible oil, flour, and sugar giant in the country — will enter the growing Bangladeshi bakery products and noodles market.

Earlier, IFC lent $22.2 million to City Group for Rupshi Flour Mills Ltd - a Tk3,000 crore flour mill project that further consolidated the group's market position.

The new flour mill is equipped with machinery from the Swiss company Bühler AG and is capable of producing over 6,000 tonnes of flour under one roof a day.

Biswajit Saha, executive director of City Group, said Rupshi Foods will make a wide range of high-quality bakery items, noodles and some other products. 

In a disclosure, IFC said that Rupshi Foods will vertically integrate City Group's existing flour, sugar, and edible oil businesses with consumer products.

It will have the capacity of producing 6.4 tons of candies and chocolates, 181 tons of cakes, 100 tons of biscuits and bakery items, and 70 tons of condensed and powdered milk a day.

The new project will be located at the City Economic Zone in Rupshi, Narayanganj.

"We will import and install machinery soon and the brand name and the product launching timeline will be announced later," Saha told The Business Standard.

The IFC Dhaka office public relations department declined to comment beyond their international disclosure right now.

The disclosure said that the project estimated to cost $122.4 million by Rupshi Foods will be financed with a total long-term debt of $83.3 million, while the remaining $39.1 million will come from equity being provided by City Group entrepreneurs.

The $20 million loans committed from IFC will have a tenure of 8 years with a two-year grace period.

IFC tends to lend money in foreign currency and this is not an exception, said City's Saha.

IFC assesses that Rupshi Foods would lead to an annual increase in Bangladesh GDP by $239 million from 2030 through its direct and indirect employment of thousands of people, and value addition.  

In the last two decades, modern mills significantly increased their share in the expanding market of branded bakery items, leaving behind the traditional small bakers in neighbourhoods across the country.  

Thanks to the increasing purchasing power of the people that created some success stories in the business, including Olympic Industries, and the biscuit market leader Pran.

More conglomerates, like Akij, and City Group, are entering the market with their huge investments, research and development and of course the economies of scale.

Pran is marketing their superior quality milk chocolates at an affordable price to gradually phase out costly imports of premium chocolates, while a few other local and regional players are trying the same from their local plants.