The performance beat analysts' expectations
On the eve of its debut on the bourse, Lub-rref (Bangladesh) Limited dealt some good news for its investors: its net profit jumped 13.2 per cent between July and December last year to Tk 8.7 crore.
The disclosure beat analysts’ expectations: earlier, Brac-EPL in a study forecasted the lubricant industry would remain sluggish until the first half of 2021 for the pandemic.
The major portion of the lubricant demand comes from the automotive sector and the industrial sectors, both of which were impacted by the disruption in normal working order for the pandemic.
“Though these sectors are recovering fast, it may still take more time to reach the previous level,” the study said.
Lub-rref’s net profit in the second quarter of its 2020-21 financial year, which runs from July to June, stood at Tk 5.89 crore, up from Tk 5.19 crore a year earlier.
The 19-year-old company, which makes its trading debut today, has raised Tk 150 crore from the public via the book-building method. The company’s products are branded as BNO Lubricants.
The fund will be utilised for expansion of business (65.3 per cent), repayment of bank loans (30.7 per cent) and IPO expenses (4.0 per cent).
The stock market regulator -- Bangladesh Securities and Exchange Commission (BSEC) -- approved the company’s proposal for the initial public offering on November 18 last year.
The IPO subscription of the company was held between January 26 and February 1 this year.
According to the book-building method of the IPO, half of the company's shares were issued to eligible institutional investors, who have set the cut-off price at Tk 30 each through bidding.
The general public had applied to buy the remaining half of the local lubricant company's shares on a 10 per cent discount to the cut-off price, meaning the general investors got IPO shares at Tk 27 each.
About 65 per cent of the proceeds from the IPO would go towards the acquisition and installation of machinery for its existing manufacturing plant, which would enable the company to capture 20 per cent market share from its existing 5.4 per cent, according to Lub-rref's IPO prospectus.
“There is enough opportunity to replace foreign brands with a national brand, especially our BNO lubricants, in the greater interest of the local industries,” Mohammed Yousuf, its managing director, earlier told Dhaka Tribune.
Since 85 per cent of the demand is served by imports, there is ample opportunity to grow, he added.
Bangladesh’s lubricant industry has been growing at 5 to 7 per cent per annum, according to LankaBangla Securities.
In 2019, the industry’s sales were about Tk 3,616 crore, it said.
The industry is expected to expand at a compound annual growth rate (CAGR) of 3 per cent until 2024, according to Brac-EPL.
Lub-rref, which has more than 85 different product lines of engine oil, generator oil, marine engine oil, automotive gear oil, hydraulic oil, compressor oil, industrial gear oil, machine oil, transformer oil, grease and so on, has performed better vis-à-vis the market leader MJL, which markets the Mobil brand of lubricants in Bangladesh, in recent years.