Aman Cotton to go for IPO to fund expansion

Aman Cotton Fibrous, a unit of Aman Group, plans to go public by using the book building method to raise Tk 80 crore to double its production capacity and repay bank loans.

Of the IPO proceeds, Tk 49.38 crore will be used to procure machinery, Tk 17.12 crore for bank loan repayment, Tk 10 crore for working capital and the rest Tk 3.50 crore for IPO expenses.

“Local companies can meet 60 percent of the total requirement of cotton yarn, while 40 percent is imported. So, there is huge potential,” said Md Toriqul Islam, a director of Aman Group, explaining why they are expanding.

Beginning its journey in 2007, Aman Cotton now produces carded cotton yarn and combed cotton yarn with a yearly production capacity of 6,780 tonnes. The products are sold to the export-oriented textiles and garment companies.

After expansion, the company's production capacity will reach 15,655 tonnes a year, according to company documents. The daily average production capacity will increase to 43 tonnes from 18 tonnes at present.

Earlier in July, Aman Cotton organised a roadshow for the institutional investors as part of its plan to go for an initial public offering or IPO.

Eligible investors such as merchant banks, asset management companies, stock dealers, banks, financial institutions, insurance companies, alternative investment fund managers and other institutions approved by the securities regulator attended the event.

A roadshow is a requirement under the book building regulations before price discovery of a company's shares.

Book building is a process through which an issuer attempts to determine the price to offer for its security based on demand from institutional investors. The price of an IPO share is determined through automated bidding joined by financial institutions.

The shares are then opened for the IPO participants at the cut-off price. The method was suspended and then revised by the regulator following the 2011 market crash.

Aman Cotton's net profit stood at Tk 19.64 crore with earnings per share standing at Tk 2.46 at the end of March, while the net asset value per share stood at Tk 34.35.

At present, 45 textiles and garment companies are listed on Dhaka Stock Exchange, accounting for about 4 percent of total market capitalisation.