Eligible institutional investors have set the cut-off price for Lub-rref’s shares at Tk30 each
Lub-rref (Bangladesh) Ltd has received the securities regulator's approval to publish its prospectus for an initial public offering (IPO) – with a view to collect Tk150 crore to expand its business.
The Bangladesh Securities and Exchange Commission (BSEC), on Wednesday, said in a statement that the company would issue 4.52 crore shares in its IPO.
According to the book building method of IPO, half of the shares would be issued to the eligible institutional investors who have set the cut-off price for Lub-rref's shares at Tk30 each through their recent bidding.
The general public can apply to buy the remaining half of the local lubricant company's shares at a 10% discount on the cut-off price.
According to the stock exchanges which operate the electronic bidding platform, the institutional investors' bids ranged from Tk13 to Tk60 for each share with a face value of Tk10.
The BSEC, in an effort to ensure responsible bidding, is going to seek an explanation from the institutions which submitted their bids at over Tk50 for each share.
More than 200 institutional bidders offered around Tk174 crore to buy half of Lub-rref's IPO shares. The company is going to collect around Tk89 crore of its Tk150 crore initial public offering from them.
The lubricant manufacturer will invest Tk98 crore to expand its existing manufacturing plant, which would enable the company to capture 20% market share – from the existing 8% – according to Lub-rref's IPO prospectus.
BNO Lubricants – a brand of the company – sells around 10,000 tonnes of lubricant, annually, for Tk175 crore.
Bangladesh's lubricant market – with an average 5% growth – has now risen to annual demand of 1.2 lakh tonnes, and the annual turnover is around Tk6,000 crore, the prospectus added.
Incorporated in 2001, the company commercially launched its manufacturing plant in 2006.
Currently, 60% of Lub-rref's lubricants are made of responsibly-recycled lubricants, while the remaining 40% are made from imported base oil – the key raw material for lubricant.
The repayment of expensive bank loans of Tk46 crore from the IPO fund would help the company reduce its finance cost. Tk6 crore is being spent on the public offering process.
As of the fiscal year that ended on 30 June, 2019, Lub-rref earned Tk2.08 against each of its shares, while the five years' average earnings per share were Tk2.23.
The net asset value per share of the company, with Tk100 crore paid-up capital, was Tk31.92 a year ago; it would be Tk25.96 without adding the revaluation surplus of assets.
NRB Equity Management is working as the issue manager to facilitate the stock market listing of the company.