The bidding to discover the cut-off price of shares of Baraka Patenga Power’s Tk 225 crore-initial public offering have been pushed back by a week to February 22.
The exercise is part of the book-building method that the power generation company chose to raise funds from the public.
The issue manager, LankaBangla Investment, will invite investors, normally large scale buyers and fund managers, to submit bids on the number of shares that they are interested in buying and the prices that they would be willing to pay.
The book is 'built' by listing and evaluating the aggregated demand for the issue from the submitted bids.
LankaBangla Investments will then analyse the information and use a weighted average to arrive at the final price for the security, which is termed the cut-off price.
Retail investors will get the shares at a 10 per cent discount price.
The exercise was supposed to begin on February 15 for four days.
The Bangladesh Securities and Exchange Commission on Wednesday approved the revised date for the price bidding of the initial public offering (IPO), according to documents obtained by Dhaka Tribune.
According to the exchange websites, another IPO of Desh General Insurance Company is scheduled to start its bidding under fixed-income method from February 14.
A stock broker said simultaneous IPO bidding of more than one company in a particular period is unlikely to help the process of price discovery and they welcome the postponement of the IPO bidding by a week.
The eligible investors who intend to participate in the electronic bidding shall have to maintain a minimum investment of Tk 50 lakh at market price in listed securities for recognised provident funds, approved pension funds and gratuity funds as on February 11, the regulator added.
For other eligible investors, they will have to maintain a minimum investment of Tk 1 crore at market price in listed securities on the same date.
Of the IPO proceeds, Baraka Power Patenga, whose parent company Baraka Power is already listed on the bourses since 2011, intends to spend Tk 144.3 crore on equity investments in Karnaphuli Power and Baraka Shikalbaha Power and Tk 74.9 crore to pay back bank loans.
Baraka Power Patenga holds 51 per cent shares of both the two companies, whose main role is to set up power plants and supply electricity to the national grid.
The equity investments would be used to settle the deferred obligations for genset procurement.
A genset refers to an equipment whose function is to convert the so-called heat capacity into mechanical energy and then into electrical energy.
Both the companies, otherwise, would have to look for alternative sources of financing to meet such deferred obligations, which might be much costlier resulting in lower profitability, said Gulam Rabbani Chowdhury, chairman of Baraka Power Patenga.
After the repayment of long-term debt of Baraka Power Patenga with a portion of the IPO proceeds, the company's profitability would increase as it would lessen the strain on cash flow.
“Our mission is to become the largest power generating company in the private sector by developing more power plants across the country,” Chowdhury said.
The private sector now dominates Bangladesh’s power generation. As of December 2018, its contribution was 54.4 per cent of the total electricity against 45.7 per cent produced by the state-owned power plants.
As per the power division data, the country's total power generation capacity reached 20,343 MW in 2018, of which 11,057 MW came from private sector producers.
The private companies developed 50 power plants with an investment of $12 billion until 2018. Many of them planned for further investment.
Established in 2011, Baraka Power Patenga is one such company.
Baraka Patenga Power intends to play a big role in the government's target to ensure electricity for all by 2021, through installing more power plants, Chowdhury said.
Located at Patenga in Chittagong, Baraka Power Patenga’s plant can generate 50 MW of electricity.
The plant, which started its commercial operation in May 2014, used eight brand-new Rolls Royce engines having a capacity of 6.984 MW each.
Besides, the company set up a co-generation secondary power plant with capacity of 3.20 MW, which was brought under operation in April 2015. The plant runs by heat recovery with Rolls Royce gensets exhaust gas without burning any fuel.
For the first time in the power sector in Bangladesh, a desulphurisation plant was introduced to the project to reduce sulphur emission to an acceptable low level, according to the company.
The company cannot declare bonus dividends for five years from the date of issuance of consent letter over its IPO.
The commission also directed the company to hold 51 per cent shares of its subsidiary companies at all times.
In its 2019-20 financial year that ended on June 30 last year, the company logged in Tk 67.4 crore as profit, up a staggering 123.9 per cent.
