Apparel factory owners are increasingly becoming dependent on the country’s stock market for raising low-cost funds to expand their business thanks to higher interest rates of the commercial bank loans.
According to Dhaka stock Exchange (DSE), a total of six RMG-related company raised funds of over Tk381 crore while three others got approval from the regulator to collect an amount of Tk232 crore in the first 10 months of this year.
Meanwhile, over 15 apparel factory owners submitted their Initial Public Offering (IPO) prospectus to Bangladesh Securities and Exchange Commission (BSEC) for getting approval to collect fund through issuance of shares to the public.
As per the initial public offering prospectus of some companies, most of the prospectus aimed at fund raising for paying-off bank term loans, capital investment, expanding of the existing plants, working capital purpose, purchasing new machinery, constructing new factory buildings, purchasing of land and land development.
“Entrepreneurs want to be enlisted with the stock market as it reduces cost of financing for business expansion,” Envoy Textile (listed with Dhaka Stock Exchange) Managing Director Abdus Salam Murshedy told the Dhaka Tribune.
On the other hand, getting funds from outside the banking system would help reduce debt and increases brand values with a further scope for indirect advertisements for the company, he added.
“As a company has to count high interest for bank loans and thus lion share of the profits are being paid as bank’s interest, we are preferring stock market for raising low-cost fund,” said MS Zaman, company secretary of Far-east Knitting and Dyeing Limited.
“It’s a positive sign that the RMG businessmen are showing interest to collect fund from the stock market,” said AB Mirza Azizul Islam, former adviser to the caretaker government.
Expressing concern over the appropriate use of the funds, Azizul Islam has, however, warned the regulator of keeping strong monitoring system, so that the money could not be siphoned off.
“Banks offer loans with high interest rates while foreign lenders are offering us lower rate and now the capital market has become another source of financing without any interest,” BGMEA vice-president Reaz Bin Mahmood said.
Currently, 36 textile companies are enlisted with the Dhaka Stock Exchanges and the sector represent 3.5% of total market capitalisation in the market.
According to a recent report, the global apparel market will cross the US$2 trillion mark by 2025 from the current value of $1.1 trillion.
According to Bangladesh Knitwear Manufacturers and Exporters BKMEA, the EU and USA are the two largest importers of Bangladeshi RMG products and 86% of the total exports are serving to these giant, which are only 6% of total demands.
According to EPB, in FY13-14, the RMG sector accounted for 81.13% of total export, earning over $24.49bn and contributing around 20% of the country’s GDP.
