City Group to raise Tk 15b from market for working capital, debt repayment

City Group plans to raise around Tk 15 billion from the secondary market at a time when it is heavily burdened with bank loans, straining its capacity to continue operations.

The proposed fundraising is expected to take place over the next 12 to 18 months on a best-effort basis, subject to applicable laws and regulations, regulatory approvals, and market conditions.

To this effect, City Group on Wednesday signed an agreement with LankaBangla Investments to facilitate the fund collection as an issue manager.

The instruments for raising capital may include an Initial Public Offering (IPO), private equity, preference shares, corporate bonds, Sukuk and/or other permissible capital market vehicles.

As part of the move, the group will decide which companies will raise capital and through which instruments.

On fund utilisation, Reza Uddin Ahmed, a director of City Group, said there was no scope of further business expansion for the group. “So, the fund mainly will be used as working capital and for repayment of debts.”

The group has outstanding bank loans of more than Tk 266 billion, owed to several banks and financial institutions, according to media reports.

The high repayment pressure has resulted in working capital constraints and presented broader economic challenges to the enterprise. To address the situation, City Group has sought a coordinated restructuring of its loans. Banks are currently assessing the group’s financial position and exploring measures to support its ongoing operations.

Mr Ahmed said the group’s companies had been struggling mainly because of power shortage, currency devaluation and the lack of support from banks.

Meanwhile, in a press release the group said alongside other financing alternatives, they would explore the capital market as a source of sustainable financing to support its future growth and financing requirements.

It said the move could also contribute to the development of the country’s capital market by broadening the issuer base, creating new investment opportunities and encouraging other established entities to consider financing through the capital market.

ONE Bank will work with LankaBangla Investments as banking partner & banker to the issue, providing permissible banking services and infrastructure in connection with the proposed transactions.

Asked, the managing director of LankaBangla Securities, Iftekhar Alam, said they still were at an initial stage of the preparation for raising capital from the market.

Initially, the group set a target to gather around Tk 15 billion based on fundamental support from the companies under it.

“After an initial assessment, it will be possible to speak about the funds that can be raised from the market through different instruments,” Mr. Alam said.

No company of City Group has yet gone public. As part of its financing strategy, City Group, a leading supplier of essential food and consumer commodities, is going to make its first entry into the country’s secondary market.

The conglomerate’s operations across edible oil, flour, sugar, pulses, rice, feed and other consumer and industrial products have established it as an important part of the country’s supply chain.

At Wednesday’s agreement signing ceremony, top officials of both City Group and issue manager LankaBangla Securities were present.

The ceremony was attended by Md. Hasan, managing director of City Group, Ms. Farzana Rahman and Ms. Shampa Rahman, sponsor shareholders and directors of City Group, Mohammed Nasir Uddin Chowdhury, director of LankaBangla Investments, and Muhit Rahman, managing director of ONE Bank, along with senior executives from the respective organisations.

Source: The Business Standard