The cut-off price of Baraka Patenga Power’s share has been fixed at Tk 32 for each through electronic bidding by eligible institutional investors.
Cut-off price means the investor is ready to pay whatever price is decided by the company at the end of the book building process. Retail investors have to pay the highest price while placing the bid at Cut-Off price.
As per the book building method, qualified investors took part in the price discovery of the shares by bidding within 72 hours, which began on 28th February (Sunday).
Therefore, the bidding took place from 5:00 pm on 22nd February to 5:00 pm on 25th February (round the clock) as per the revised schedule – according to the electronic subscription system (ESS).
During this period, 357 eligible investors quoted different prices to buy the company’s shares. Among them, most bids were between Tk 32 and Tk 25.
A total of 183 bidders offered Tk 32 each while 39 bidders offered Tk 25 each. The highest bidding price was Tk 32 and the lowest was Tk 13.
The general investors will get its IPO shares at a 10 per cent discount on the cut-off price, as per the book-building method.
Prior to 5th January, the Bangladesh Securities and Exchange Commission (BSEC) allowed Baraka Patenga to explore the cut-off price of its shares through eligible investors’ bidding.
As per regulatory approval, Baraka Patenga Power will raise Tk 2.25 billion from the capital market under the book-building method.
Out of total Initial Public Offerings (IPO) proceeds, more than Tk 1.44 billion will be invested in two of its subdivisions – Karnaphuli Power and Shikalbaha Power, partial repay long-term bank loans and bear the expenses of the IPO process.
However, Lanka Bangla Investment is the issue manager for the company’s IPO process.
Two Subdivisions of the Baraka Patenga – Karnaphuli Power and Baraka Shikalbaha Power have already started commercial operation after implementing two (HFO) based IPP (Independent Power Producer) power plants having generation capacity of 110MW and 105MW respectively.
In the financial year (FY) 2019-20, the Baraka Patenga earned a profit of Tk 674 million, up an accelerating 123.9 per cent.
According to the audited financial statement as of 30th June, 2020, the company’s combined earnings per share (EPS) were Tk 4.37 and separate Tk 1.84, consolidated net asset value per share Tk 23 without re-evaluated reserve and separate Tk 20.98.
In the meantime, the company’s weighted average consolidated earnings per share for the last five years were Tk 3.30 and separate Tk 2.82.
Baraka Patenga Power possesses 51 per cent shares of both the two companies, whose main role is to generate and supply electricity to the national grid.
As per the BSEC directive, the company can declare only cash dividends for the next five years from the date of issuance of the consent letter of its IPO. Also, the company has to hold 51 per cent stakes in its two subsidiaries all the time.
Such a condition of the regulatory body would be good for the general investors, market analysts said.
Baraka Power, the parent company of Baraka Patenga Power is already listed on the bourses since 2011.
Nonetheless, the equity investments would be used to settle the deferred obligations for genset procurement.
A genset refers to an equipment whose function is to convert the so-called heat capacity into mechanical energy and then into electrical energy.
If the funds are not collected from the IPO, then both the companies will have to look for alternative sources of financing to meet such deferred obligations, which might be much costlier resulting in lower profitability, said Gulam Rabbani Chowdhury, chairman of Baraka Power Patenga.
After the repayment of long-term debt of Baraka Power Patenga with a portion of the IPO proceeds, the company’s profitability would increase as it would lessen the strain on cash flow.
“Our mission is to become the largest power generating company in the private sector by developing more power plants across the country,” Chowdhury said.