IFAD Group to set up Tk 433cr industrial complex at Bangabandhu Shilpa Nagar

IFAD Group is keen to invest Tk 433.5 crore to set up an industrial complex at the Bangabandhu Sheikh Mujib Shilpa Nagar (BSMSN) as it looks to make a foray into the growing motorbike and automotive component segments.

The group placed its investment plan to the Bangladesh Economic Zones Authority (Beza) on Monday, seeking 30 acres land at the sprawling industrial city in Mirsarai, Chattogram.

IFAD intends to set up three factories in the proposed industrial complex: a manufacturing and assembly plant for motorcycles, a factory for automotive components, and a blending plant for machine lubricants.

"There is a huge business opportunity in Bangladesh for automotive components as there are more than 10 lakh commercial cars and 16 lakh passenger cars and they need spare parts," said Taskeen Ahmed, managing director of Ifad Autos.

"The demand for auto components is growing. Now, the demand is met through imports."

Thirty per cent of the project cost, or Tk 130 crore, would come from the company's retained earnings and the remaining 70 per cent, or Tk 303.5 crore, would be borrowed from banks.

Now IFAD Group's concern Ifad Motors Ltd distributes commercial vehicles of India's Ashok Leyland, including bus, truck, lorry, and dump truck, and represents Atul Autos of India serving the three-wheeler cargo and passenger car market in Bangladesh.

The upcoming automobile policy will be helpful to give a boost to the business as it would emphasise automotive component manufacturing for local value-addition, he said. 

The market size of automotive components in Bangladesh was about Tk 1,400 crore to Tk 1,500 crore last year with an annual growth rate of 10 to 12 per cent over the previous one decade, according to an estimate by automotive part importers.

The global automotive component market size is more than $2 trillion, supplied by the light engineering industry.

Ahmed said global automakers such as Toyota and Honda fulfil their requirement for components through outsourcing.

According to Ahmed, 80 to 90 per cent of finished items from the industrial complex would cater to the domestic market of Bangladesh, and the rest might be exported to other countries.

The company would start setting up the factory after getting the land as it looks to go for commercial operation within a year.

Ifad Autos has sold more than 60,000 commercial vehicles in the last two decades for a combined sales value of $750 million. Currently, it employs more than 1,000 people, according to the company's website.

Listed on the Dhaka Stock Exchange, Ifad Autos reported earnings per share (EPS) of Tk 0.92, the net asset value per share of Tk 39.73, and the net operating cash flow per share of Tk 7.68 for the year ended on June 30, 2020, against Tk 4.59, Tk 39.18 and Tk 10.51 respectively, year-on-year.

The EPS was Tk 0.70 in the July-September quarter against Tk 0.51 in the same period last year. The NAV per share was Tk 40.43 in the quarter.

Its share closed 2.24 per cent lower at Tk 39.2 on the DSE yesterday.

The government has already declared the light-engineering sector as the Product of the Year, and the automobile policy is going to be formulated. So, the industry will grow in the future, and the automakers and assemblers will need components, Ahmed said. 

"We are in discussion with auto component makers in Japan, India, Korea, China and Taiwan to work jointly or forge technical collaboration," he said.

The industrial complex would start with manufacturing filter and seat of automobiles before moving to other components.

"We will give attention to research in the next three years to develop components and increase the volume of finished products," Ahmed noted.

The planned investment is expecting to create 1,000 jobs.

The motorcycle manufacturing unit will be set up in partnership with a European brand to churn out high-end two-wheelers.

Ahmed sees a good market for the high-end motorcycles in Bangladesh in the coming days. The demand for motorcycle is around 5 lakh per year, and it would double within the next five years. 

Gulf Oil Bangladesh that would produce lubricants would be a joint venture between Gulf Oil International UK Ltd and Ifad Group.

Paban Chowdhury, executive chairman of the Beza, said the investment proposal of Ifad Group is different and shows long-term vision.

"The group will be able to cater to the component automotive sector in Bangladesh."

The Beza has also received investment proposals from Uttara Motors, Star Allied, and Bangladesh Auto Industries Ltd, he said.