Export-focused shoemaker Craftsman Footwear and Accessories looks to get listed on the SME board three years after beginning production, as it secured an exponential growth in profit between FY21 and FY23.
Sadat Hossain Salim, who founded the organisation from his experiences working in local and international companies, says he thinks Tk 50 million from the primary market would help sustain the growth trajectory with the money being used to improve production capacity and for repayment of bank loans.
The company has already sought approval of the Bangladesh Securities and Exchange Commission (BSEC) for listing on the SME board. Green Delta Capital is the issue manager.
"If we get listed on the SME board, we will strive to move to the main trading platform of the bourses after three years," says Mr Salim.
If regulatory permission is given, Craftsman Footwear will release five million ordinary shares at Tk 10 each.
Why stock market listing
The company has long-term loans worth Tk 373.95 million from Basic Bank, while its short-term loans amount to Tk 194.68 million taken out from several banks as of June this year.
The net asset value per share is Tk 16.72 as of June and earnings per share Tk 2.35.
Against the backdrop of rising lending rates and policy rate intended to tame inflation, Mr Salim considers the stock market as a better alternative to banks for sourcing fund.
The interest rate against bank loans may go up to 15 per cent in the near future hampering sustainable business growth, he says. "We will give at least 10 per cent dividend to shareholders instead of paying 15 per cent interest on bank loans."
Craftsman Footwear has set a goal to raise its export volume to be worth $12 million by the next three years. It intends to construct new buildings to expand production and warehouses.
Public listing, according to Mr Salim, will boost the company's brand image and help gain foreign buyers' trust when it comes to sourcing products. Stock market listing can also be leveraged in creating partnership with foreign investors, he says.
Financial status
The company's overall sales more than doubled year-on-year to Tk 733 million in FY23, backed by higher exports. Its export volume soared 237 per cent to Tk 711 million while domestic sales dropped 19 per cent to Tk 23.14 million, which indicates the shoemaker's focus on foreign markets.
Craftsman Footwear manufactured and exported around 340,000 pairs of shoes between April 2020 and June 2023. The destination of the products were Italy, Japan, the USA, Germany, Canada, Hungry, Austria, Poland, and Spain, and major buyers were Hush Puppies, Bata, Tata Italia, Parrotto, Unit, Fine Boys, On Spirit Primadonna.
The company has two production units, one meant for manufacturing products for local market while the other for exports.
To achieve the $12 million revenue target, the shoemaker plans to introduce double shifts in its Gazipur factory by next year.
Leather from domestic sources, says Mr Salim, is of high quality because of fine grain, uniform fiber structure, and natural texture. Moreover, Bangladesh has cost competitiveness when it comes to exports of finished leather, leather goods, and leather footwear, which will support further growth of the company, he adds.
Journey of Craftsman
Craftsman Footwear started its operation with 35 employees at a small factory in Joina Bazar of Sreepur upazila, Gazipur. It expanded in size over time.
In a recent visit, the FE correspondent found a state-of-the-art manufacturing facility occupying an area of 100,000-square-foot with more than 750 employees.
Mr Salim says he was inspired to invest in the footwear industry from his previous work experiences. Skilled designers at the factory make shoes of a diverse range, adhering to global standards. The production unit has cutting-edge machinery from Italy and Germany, he claims.
Leather is sourced from Chattogram-based tannery Riff Leather, which has the worldwide Leather Working Group (LWG) certification, and from compliant tanneries in Asia to maintain product quality, says the managing director.
Craftsman Footwear has introduced its brand name in the local market and ensured its presence in the online space as well.
"We have a plan to set up a physical store for local customers in future," says Mr Salim.
Currently, around 60-65 per cent of the shoes available in the country are made of synthetic or artificial leather, he says, adding that there is a huge potential for leather shoes and products in the country.
Challenges
The availability of global brands in the local market creates hard competition.
"Though Bangladesh has a good supply of raw hides, we are losing [business] to China, Pakistan, and India because we don't have enough LWG-certified leather producers."
Moreover, a backward linkage industry is missing, which is why many raw materials, to make soul and zipper for example, are imported from China, India, and Taiwan. That leads to higher costs of production.