Source: TBS 14 July, 2022, 12:00 pm
Lack of policy support, modern machinery and absence of interest-free easy loans are major bars to the sector’s growth, say insiders
The light engineering industry, considered to have a major export potential, continued to grow in the 2021-2022 fiscal year but still a long way from grabbing a sizable chunk of the massive $7 trillion global market.
In the 2021-22 fiscal year, the sector saw a significant year-on-year growth of 50.4% to $795.63, from $529 million in the 2019-2020 fiscal, which was also when the government declared light engineering goods as “Product of the Year”.
Industry insiders say the sector has the potential to grow much more than it is doing now.
“We are nowhere close to where we can be,” said Golam Azam Tikul, president of Bogura Forum for Agro-machinery Manufacturing.
Lack of policy support from the government, shortage of modern machines and absence of interest-free easy loans are major hindrances for the sector’s growth, according to Tikul.
Stakeholders say unhealthy working environments for workers, high prices of raw materials, lack of laboratories and certification systems are further hindering the industry’s development.
The market is also taking a blow due to production of counterfeit products in unauthorised factories and import of substandard products from India and China, they added.
After the light engineering products were declared as the Product of the Year for 2020, the government decided to set up industrial parks for the sector in five districts – Dhaka, Narayanganj, Jessore, Bogra, Gazipur and Narsingdi.
Besides, an industrial city project through the Bscic on a 50-acre land in Munshiganj is in progress at a cost of Tk316 crore and scheduled to be completed by 2022.
Muminur Rahman Mithu, an entrepreneur from Old Dhaka, said the price of plots in government-allocated industrial parks, including Munshiganj, is much higher than lands located elsewhere.
“Also, the area of land in these parks across the country is insufficient as compared to light engineering factories across the country. As a result, 80% of entrepreneurs will not really benefit from it,” he added.
Despite these obstacles, the sector’s export reached $529 million in FY21 from $292.92 million in the pandemic-hit 2019-20 fiscal.
Abdur Razzak, president of the Bangladesh Engineering Industry Owners Association (BEIOA), said, “Overall investment in the light engineering industry is about $15 billion and we are still below 1% of the $7 trillion global market.”
He also pointed out the industry meets about 20% demand of the local market while some 60% products are imported.
“If we get enough government land, state-of-the-art technology, pragmatic policies and low cost government land for setting up factories, this sector will not have to look back,” said Razzak.
He further said import tax for the sector’s raw materials ranges from 30-40% while the tax on importing finished products is only 1%.
“If this disparity is eliminated with industry-friendly policy support, it is possible to meet total local demand and also increase exports,” he added.
Before the budget of FY 2022-23, SME Foundation submitted 50 proposals to the National Board of Revenue for small and medium enterprises including light engineering, out of which 14 proposals were accepted in this budget. This includes providing income tax exemption for a period of 10 years to entrepreneurs engaged in agro-processing and agricultural machinery and all types of light engineering industries related to light engineering which will be used only in industries.
In the budget for the 2022-23 fiscal year, the government provided a 10-year tax-holiday for entrepreneurs who produce small parts and products for use in factories.
Besides, there is a VAT exemption for the production and commercial distribution of Power Tiller and for the supply of locally collected scrap in the foundry industry.
Md Mofizur Rahman, managing director of SME Foundation said, “It is important to reduce the tax rate in the entire SME sector, including the light engineering sector.”
Citing the example of Japan, he said, “Their economy is 90% dependent on the SME while our SME sector accounts for some 20-25% although more that 75% employment is in this sector.”
According to him, if people in the industry do not get help, it will be difficult to achieve the government’s target of 2041.
“Why should we need to spend time on updating the trade licence each year. The government can rather increase the fee and also the validity period,” he suggested.
The main markets for the light engineering products are Thailand, Japan, the Netherlands, India, South Korea, the United Kingdom, Taiwan and Pakistan.
Source: TBS Report
06 July, 2022, 07:50 pm
Bidding to set the cut-off price – the offer price at which shares get issued to investors – for the shares of Navana Pharmaceuticals which will raise capital from stock markets under the book building method ends on Thursday.
The share price will be determined based on offers made by eligible investors – institutions and high net worth individuals – in the electronic subscription system.
General investors will receive the primary shares at a 30% discount on the cut-off price.
The bidding for the company started from 5 pm on 4 July, which will continue till 5 pm Thursday.
The principal activities of the company are manufacturing, marketing and distribution of pharmaceutical products for human and animal health and sales of the produced items in the domestic and foreign markets.
The company is currently marketing 48 human and 48 veterinary products.
Navana Pharmaceuticals will expand its business
Starting its business journey in 1986, Navana Pharmaceuticals will now expand its business.
The company will raise capital of Tk75 crore by issuing shares to stock investors as an alternative source of finance instead of bank loans.
According to its IPO prospectus, the company will use the fund to renovate its cephalosporin unit and build manufacturing, utilities and engineering buildings.
The company has a factory at Rupshi in Narayanganj. The general production unit and the veterinary production unit went into operation in 1986 and 2003 respectively.
Financial status
The financial accounts for the last five years indicate that the company’s business in the local market and exports have been steadily increasing.
Its products are exported to Myanmar, Vietnam, Sri Lanka, Kenya, and Hong Kong.
Navana Pharmaceuticals had total revenue of over Tk243 crore in fiscal 2017-2018, of which over Tk223 crore was local sales and Tk10.82 crore was exports.
Five years later, in fiscal 2020-21, the company’s revenue increased to Tk360 crore, of which domestic sales are Tk336 crore and exports are Tk24 crore.
In the first nine months of fiscal 2021-22, its earnings per share (EPS) were Tk2.39.
Navana Pharma / Share Price / bidding
Alif Group has expressed its interest in buying 25 percent shares in BD Welding at an agreed rate from ICB
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Bangladesh Welding (BD Welding) Electrode Ltd will change its category from “Z” to “B” on the stock market by issuing dividends.
The company will change its category in order to implement the transfer of its shares held by the state-owned Investment Corporation of Bangladesh (ICB) to Alif Group – a local private sector investor.
Alif Group has expressed its interest in buying 25 percent shares in BD Welding at an agreed rate from ICB.
Earlier, in July 2019, Alif Group and ICB signed a memorandum of understanding (MoU) for the acquisition of the shares. However, the deal was not implemented as BD Welding has been in the “Z” category of the stock market since 2015.
The company has also failed to hold its annual general meeting (AGM) since the 2018 financial year.
As per the securities law, ownership of a company that fails to issue dividends and hold annual general meetings cannot be transferred.
Owner company ICB sought release from this law from the Bangladesh Securities and Exchange Commission (BSEC), to sell its entire holdings to Alif Group, but the regulator did not agree with ICB.
Therefore, as an alternative solution, ICB, on behalf of the company, filed a petition with the High Court to hold the AGM and board meeting of BD Welding for the financial years 2018-19 and 2019-20.
In February this year, the High Court gave permission to BD Welding to hold a board meeting and an AGM.
After the permission was granted, BD Welding held its board meeting on Sunday.
The company’s board of directors has recommended no dividend for the year ended on June 30, 2018. However, it recommended a one percent stock dividend for the year ended on June 30, 2019.
The dividend would be approved at the AGM dated September 17, 2020. To ensure shareholders’ participation, the record date is set for August 31 this year.
BD Welding has posted a loss per share of Tk0.08 for the year ended on December 31, 2019. Its net asset value per share was Tk11.61.
SM Nurul Islam, managing director of BD Welding, who currently owns around five percent of the company, said that after the dividend approval at the AGM, the company will move from “Z” to “B” category. Therefore, ICB will face no troubles in selling the shares to Alif Group.
He added, “The company is now facing a cash crisis to set up a new factory. We have not been able to manage funds from any other sources because of ICB’s obligation. Alif wants to invest in BD Welding as the owner of the company. However, due to these complications, it has not invested yet. I hope in the next few months this issue will be resolved and we will get money to run this company.”
Earlier, in 2017, BD Welding sold its land in Chattogram to BSRM Group to repay a bank loan. Recently, the company purchased land in Dhamrai to set up a new factory with existing machinery.
In 1999, the company entered the stock market to collect funds in setting up an oxygen plant in Chattogram. It was competing with the multinational Linde Bangladesh and some new entrants until its raw material imports were disrupted because of a lack of banking support due to defaulted loans.
Losing the edge gradually pushed the company lower and it ended up halting production.
In 2009, five out of eight sponsors sold their entire holdings to the ICB and now the state-owned investment entity is chairing and controlling the BD Welding board.
The company’s paid up capital is Tk42.92 crore. Out of total shares, general shareholders hold 65.39 percent.
The closing price for the company’s shares was Tk22.20 per share on the Dhaka Stock Exchange on Monday.
Source: TBS
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