The cut-off price of shares of Lub-rref (Bangladesh) Ltd, a local lubricant producer, has been fixed at Tk 45 each through electronic bidding by eligible investors.
The eligible investors took part in the price discovery of the Chattogram-based lubricant company's shares by bidding for 72 hours - from 5:00pm on October 12 to 5:00pm on October 15, as per the book building method.
During the period, a total of 245 institutional and eligible investors offered different prices to buy the company's shares. Among them, most bids were Tk 50 and Tk 61 each, according to the data from the electronic subscription system (ESS).
A total of 24 bidders offered Tk 50 each and 17 bidders offered Tk 61 each to buy the lubricant company's shares.
The highest bidding price was Tk 98 and the lowest bidding price was Tk 14 each, according to the ESS data.
The stock market regulator - Bangladesh Securities and Exchange Commission - allowed the company to explore its cut-off price on August 20 - a requirement for going public under the book building method.
The local lubricant company will raise a capital worth Tk 1.50 billion from the capital market under the book-building method.
As per the book building method, the eligible investors will buy 50 per cent or worth Tk 750 million shares.
The remaining 50 per cent shares will be opened to the IPO participants, including general investors and non-resident Bangladeshis, at a 10 per cent discount on the cut-off price.
The IPO proceeds will be used for expanding its existing refinery plant with an aim to meet the growing demand for lubricants from both home and abroad and repay some expensive bank loans.
To finance the expansion, around Tk 980 million will be funded through IPO proceeds, which would enable the company to capture 20 per cent market share, from the existing 8.0 per cent, company officials said.
Luf-rref, whose products are branded as BNO Lubricants, recently introduced Nynas technology based transformer oil and nano technology based lubricants to minimise carbon emissions and ensure engine longevity.
The company is also set to invest Tk 4.0 billion to establish the country's first state-of-the-art base oil refinery with an aim to meet the growing demand for lubricants, Mohammed Yousuf, managing director of Lub-rref (Bangladesh) said recently.
The sector has huge potential for growth in Bangladesh as the local lubricant market is mostly import based.
"Around 85 per cent of total demand is supplied through imports and foreign brands dominate the local market. Lub-rref wants to break the domination of foreign brands and make Bangladesh self-reliant," said Mr Yousuf.
Of the total investment, Tk 1.20 billion would come from equities and return earnings while the rest will be financed through foreign loans, he added.
As of the fiscal year that ended on June 30, 2019, the company's earnings per share stood at Tk 2.08, while the five years' weighted average EPS was Tk 2.23.
The net asset value per share of the company, with a Tk 1.0 billion paid-up capital, was Tk 31.92 with the revaluation surplus of assets.
NRB Equity Management is working as the issue manager to company's IPO process.
Incorporated in 2001, the company commercially launched its manufacturing plant in 2006.
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