Lub-rref, a local lubricant producer, is set to invest Tk 400 crore to establish the country's first state-of-the-art base oil refinery with an aim to meet the growing demand for lubricants from both home and abroad.
"The sector has huge potential for growth in Bangladesh as the local lubricant market is mostly import based," said Mohammed Yousuf, managing director of Lub-rref.
Base oils are a raw material used to produce various lubricants, such as grease, motor oil and metal processing fluids.
Of the total investment, Tk 120 crore would come from equities and return earnings while the rest will be financed through foreign loans.
Alongside the construction of a new base oil refinery at the Julda Industrial Theme Park in Chattogram, the company will expand its present factory and fit it with the means to produce a higher grade of lubricant products.
To finance the expansion, around Tk 98 crore will be funded through Lub-rref's initial public offering (IPO) proceeds.
The Chattogram-based company recently secured approval from the Bangladesh Securities and Exchange Commission to off-load its shares and raise funds of Tk 150 crore. Of these IPO proceeds, Tk 46 crore will be used to pay back bank loans.
Bangladesh consumes around 1.2 lakh tonnes of lubricants annually, of which 1.04 tonnes is met through imports while about 0.16 tonnes is produced locally, according to the company's data.
Meanwhile, Lub-rref aims to export its products after meeting domestic needs in order to capture a greater share of the rising global demand, which is being driven by the growth of automotive production worldwide.
"Lub-rref wants to break the domination of foreign brands and make Bangladesh self-reliant in lubricant production," Yousuf said during a press conference at the existing factory's premises.
The new project, being established right on the brink of the Karnaphuli river, will have an annual production capacity of about 70,000 tonnes.
Having secured all 25 certificates required to break ground, the project will be developed across 16 acres of land and is expected to be complete within the next two years.
As a part of its plans, Lub-rref will gradually set up a tank terminal, berth operating jetty, bitumen plant, hydrogen plant and power plant in the area as well.
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.
"At present, our market share is 8 per cent, which we aim to increase by 20 per cent with the new plant," said Mofijur Rahman, chief financial officer of Lub-rref.
The lubricants company makes 60 per cent of products with responsibly recycled lubricants while the remaining 40 per cent is made out of imported base oils.
"By recycling old oils, we are contributing to our environment," he added.
About 60 per cent of BNO lubricant products are being used by the automotive sector while 35 per cent is used by various industries, including power transformers, power plant factories and industrial generators.
The remaining 5 per cent is used by the marine sector for their engines, according to company data.
Lub-rref's paid up capital was Tk 100 crore and its revenue rose 11.6 per cent to Tk 153 crore in 2018-19.