RAK Ceramics to invest Tk902cr in a greenfield tiles plant
The company has estimated that the new factory would generate Tk93 crore profit per year on an average
RAK Ceramics (Bangladesh) Limited is going to invest Tk902 crore to build a new tiles factory in Gazipur to meet the growing demand for the construction material in the country.
The leading tile manufacturer's board took the investment decision at a meeting held on Monday.
To build the factory at Bhutulia in Gazipur, the company will buy 33.91 acres of land from its Managing Director SAK Ekramuzzaman for Tk62.73 crore.
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RAK Ceramics, a UAE-Bangladesh joint venture company, will need the general shareholders' approval to buy the land. It will hold an extraordinary general meeting in this regard on 4 August.
Sources at RAK Ceramics said the new factory will be capable of producing 15,000 square metre of tiles per day. Around 1,500 people will be employed in the factory, which is expected to go into operation by 2025.
The company has initially estimated that the new factory would generate Tk93 crore profit a year on an average.
"The new factory will produce value-added premium category tiles. Our country still imports premium category tiles, so we want to capture that market," Sadhan Kumar Dey, chief operating officer of RAK Ceramics, told The Business Standard.
"RAK tiles have a worldwide reputation. Tiles of the same standard are manufactured in all the countries where RAK has factories," said Sadhan Dey, who is also the company's chief financial officer.
Regarding the source of funding, he said the company would decide it in a board meeting in July.
A source at the company said foreign direct investment for the new factory is not likely to come from investors in the UAE, so funding will be arranged from sources inside the country.
The company's board meeting will decide whether the money will be borrowed from banks or collected from the capital market.
RAK Ceramics is a zero-debt company, which means it has no bank loans.
The market for tiles has been growing in the country as the real estate sector has witnessed a double-digit growth over the last decade.
According to a report by non-bank financial institution IDLC Finance, the size of the country's real estate sector is around Tk60,000 crore, and it is growing at a rate of 15-17% every year.
According to RAK Ceramics' annual report for 2021, about 30 companies are currently producing tiles in Bangladesh. The combined production capacity of these companies is 4.90 lakh square metres per day.
The country's production capacity has increased by 200% in the last decade and Tk5,235 crore has been invested in this sector.
In the financial year 2019-20, tiles worth Tk4,600 crore were sold in the country's market, where the local companies' share was 84%.
In the last two years, large companies like Akij Group, Meghna Group, Sheltech, DBL Group have invested in the tiles market, which increased the competition in the market.
Regarding the matter, Sadhan Kumar Dey said, "When we started the business in 1998, the tiles market was completely dependent on imports. Our brand reputation has been established in the last 24 years."
"Besides, no one else makes quality tiles like the ones we make. The competition in the market has increased, but it will not affect our business."
He said RAK manufactures premium quality tiles, which competes mainly with the imported tiles.
According to sources at the company, RAK accounts for more than 16% of the tiles sold in the domestic market in terms of value. In terms of quantity, their market share is about 6%.
In 2021, the company's tiles sales increased by 33% over the previous year to Tk698.78 crore. In the January-March quarter of this year, it witnessed 16% growth.
In addition to tiles, RAK Ceramics also produces sanitary ware, fetching Tk250 crore annual income from it. However, the company has no plans to expand this business.
The paid-up capital of RAK Ceramics (Bangladesh) is Tk427.96 crore.
RAK Ceramics PJSC holds 68.13% share of the company, local entrepreneur SAK Ekramuzzaman owns 3.95 share, while general investors hold the remaining shares.
The company's shares were traded at Tk47 on the Dhaka Stock Exchange on Tuesday.
