Index Agro Industries plans to use more than half of its Tk 500 million IPO proceeds in any "profitable projects" but not for the construction of building and machinery installation for which the fund was raised in January 2021.
The company also seeks one more year to fully utilise IPO fund.
"If the revised IPO utilisation plan is approved, the company's profitability will increase. Ultimately, investors will be benefited," said Abu Jafar Ali, company secretary of Index Agro.
Index Agro had already spent more than Tk 231 million of the collected funds, of which Tk 138.50 million went into paying a short-term loan from Bank Asia.
"Now, the board has decided to utilize the remaining funds for more profitable projects, particularly in the feed mill division," added Mr Ali.
The company manufactures and markets animal feed and produces day-old-chicks (DOC). To meet the growing demand for chicken, it has set up two breeder farms and hatchery at Rajendrapur and Bogura and a feed mill at Bhaluka.
It has come up with the revised plan because the securities regulator approved its IPO in 2021 more than four years after it had applied for listing in the stock market.
By the time it got the approval, it had already set up machinery and completed building infrastructure needed for business expansion. The cost had been borne through bank borrowings and partially from the company's own sources.
In order to secure shareholders' approval of the revised plan and time extension, the company will hold an extraordinary general meeting (EGM) on July 20.
The record date is June 15, which means investors holding Index Agro shares till the day will be entitled to attend the meeting virtually.
As per the IPO prospectus, the fund should have been fully utilised by the poultry, fish and cattle feed producer within 18 months from the day it was received. The time ended August last year.
The company got first time extension by the securities regulator until August this year. Now it looks to spend the remaining fund by August 2024, according to a disclosure posted on the Dhaka Stock Exchange (DSE) on Sunday.
Some of the money will go to repay dues as the company invested 140 million in the feed division in December last year to expand the capacity of storing raw materials by 16,000 tonnes, said the company official.
Index Agro has feed division, breeder farm division and hatchery division.
Having a storage capacity of 42,000 tonnes now, it can buy more raw materials when the prices are lower.
Quality raw materials are not available throughout the year, the reason why the company management increased the storage capacity, said Mr Ali.
Index Agro is procuring raw materials mostly from local suppliers and its customers are all local too. Thus, the company has little exposure to exchange rate risk.
"We have achieved a satisfactory growth in business in the 2022 fiscal year despite the slowdown in economic growth and the uncertainties caused by the pandemic and Ukraine war," said Mr Ali.
Index Agro's sales revenue increased 13.12 per cent year-on-year to Tk 4.14 billion while profit rose 3.45 per cent to Tk 240.59 million in FY22.
It declared 10 per cent cash dividend for the year.
In the nine months through March of FY23, the company's sales revenue rose 10 per cent year-on-year to Tk 3.22 billion, but profit dropped 25 per cent to Tk 172 million, compared to the same period a year ago.
The production cost jumped more than 13 per cent in the nine months due to higher prices of raw materials and energy price hike, which cut down the profit, said the company secretary.
Meanwhile, the stock is stuck at the floor price of Tk 103.6 on the DSE trading floor since November last year.
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