Lower cost of fund encourages textile companies to go public

7 cos raise Tk 374.17cr in FY14 against Tk 179cr by 3 cos in FY13

HM Murtuza
A file photo shows employees working at a garment factory in Dhaka. Lower cost of fund has attracted apparel companies to the country’s capital market that resulted in 109.03 per cent or Tk 195.17 crore increase in fund collection by the sector in the just concluded fiscal year 2013-14 compared with that of the previous fiscal year.— New Age photo

A file photo shows employees working at a garment factory in Dhaka. Lower cost of fund has attracted apparel companies to the country’s capital market that resulted in 109.03 per cent or Tk 195.17 crore increase in fund collection by the sector in the just concluded fiscal year 2013-14 compared with that of the previous fiscal year.— New Age photo

Lower cost of fund has attracted apparel companies to the country’s capital market that resulted in 109.03 per cent or Tk 195.17 crore increase in fund collection by the sector in the just concluded fiscal year 2013-14 compared with that of the previous fiscal year.
Bangladesh Securities and Exchange Commission in the fiscal year allowed seven companies of the textile sector to collect fund worth Tk 374.17 crore compared to Tk 179 crore to three companies in the previous year.
The textile firms feel attracted to enter the stock market instead of banking sector to collect fund for their business expansion as the cost of fund in the capital market is low, experts in the banking sector said.
It is difficult for the domestic companies to make their business viable with high bank interest, competing with the growing domestic market and also in the international market.
The BSEC in last fiscal year allowed Far East Knitting & Dyeing Industries to raise fund worth Tk 67.50 crore, while Shurwid Industries Tk 14 crore, Tung Hai Knitting & Dyeing Tk 35 crore, Hwa Well Textiles (BD) Tk 20 crore, Matin Spinning Mills Limited Tk 126.17 crore and Paramount Textiles Limited Tk 84 crore.
Familitex (BD) raised Tk 34 crore in the fiscal year 2012-13, while Bangladesh Windsor Thermoplastics and Argon Denims raised Tk 40 crore and Tk 105 crore respectively.
Malek Spinning Mills Limited was the lone company that raised Tk 100 crore in 2010-2011, while the Envoy Textiles Limited, Generation Next Fashions, Saiham Cotton Mills and Zahintex Industries raised Tk 265 crore collectively in 2011-12.
Besides, Keya Cotton, Hamid Fabrics, MP Spinning Mills, Keya Spinning Mills, Dragon Sweater and Spinning, Fiber Shine, Royal Denim and Shasha Denims are the other companies waiting to get regulatory approval to raise capital of around Tk 680 crore from the market.
Abdus Salam Murshedy, Managing Director of Envoy Group, said increasing number of listed companies from the apparel sector coming to the capital market is a good sign.
Murshedy, also a former president of Bangladesh Garments Manufacturer and Exporters Association, said it is also helping the industries to undertake expansion plans.
It is difficult for the apparel industries to make their business viable with the banks’ fund, as the landing rate of the banks is around 16-18 per cent for the last couple of year, he said.
To sustain competitiveness, some industries are borrowing from foreign banks as the cost of fund is low there. Due to the same reason, apparel industries are eyeing at the capital market for their business expansion and to get fund, he said.
A BSEC official said that due to the high interest rate in the banking sector, textile industries are availing the opportunity to get fund from the capital market to expand their business.
The trend might fall if the banks’ interest rate reduces to single digit, they said.
About 36 lakh people work in the country’s clothing industry which is the world’s second-largest supplier of garment products after China.
Destination of nearly 60 per cent of the exports is Europe while 23 per cent goes to the United States.
Of the total 260 listed companies presently at Dhaka Stock Exchange, there are 34 textile sector firms. The number is the third largest of companies coming from a single sector.
The textile companies are the tenth in terms of market capitalisation.



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