Renata set to obtain $60m loan from IFC

Renata PLC, one of the leading drugmakers in the country, is set to secure a $60 million loan from the US-based International Finance Corporation (IFC) to bolster its working capital.

This is the first foreign currency loan to be secured by the drug maker, amounting to over Tk700 crore at an exchange rate of Tk118 per dollar. The loan may be structured with a six-year term, including a one-year grace period.

"The loan agreement with the IFC is expected to be signed before 30 June," said Renata Company Secretary Md Jubayer Alam.

He told TBS that the interest on the foreign currency loan would be under 9%, calculated based on the Secured Overnight Financing Rate (SOFR) plus 3.5%.

The interest rate is significantly lower than the current lending rate in the local banking sector, exceeding 13%.

According to a disclosure published on the stock exchange website on Thursday, the board of directors of Renata has already approved the signing of the agreement.

Jubayer Alam said, "The company is obtaining the loan to pay for raw materials imported from the international market as there is a shortage of dollars in the local banks for opening letters of credit."

"This will help the company to mitigate foreign currency liquidity risk as well as the cost of financing as the terms offered on this credit facility compare favourable to the cost of local borrowing," he added.

According to Renata's financials for July to March of the 2023-24 fiscal year, the company has Tk1,273 crore in loans and borrowings. However, officials said this amount may have risen to approximately Tk1,700 crore to date.

Last year, Renata decided to raise Tk850 crore through a bond and preference shares to pay off short-term debt owed to banks and non-bank financial institutions. Company officials described the move as strategic to mitigate the potential impact of rising interest rates.

The fundraising plan includes Tk350 crore from the issuance of non-convertible, non-participative preference shares and a Tk500 crore zero-coupon bond for the next five years.

In January this year, the Bangladesh Securities and Exchange Commission (BSEC) approved Renata to issue a five-year bond worth Tk660.15 crore.

In April, the securities regulator allowed Renata to issue redeemable, cumulative, non-convertible and non-participative preference shares amounting to Tk350 crore through a private offer.

The fundraising process through debt instruments is still underway.

During the July to March quarter of FY24, its revenue stood at Tk2,781 crore, which is up from Tk2,439 crore at the same time of the previous fiscal year.

Despite the profit jump in Q3, its net profit declined to Tk258 crore, down from Tk269 over the same time of the previous fiscal year.

Recently, the local drug maker started to export its products to the Australian and UK markets. In FY23, it had exported drugs worth $18.60 million.

Its net profit dropped over 54% to Tk231 crore in the fiscal year 2022-23 compared to the previous fiscal. And, its earnings per share came down to Tk20.21 in FY23 from Tk44.56 in FY22.

Due to the lower profit, it recommended a lower dividend than the previous year. It declared a 62.5% cash dividend for the fiscal year 2022-23, which was 140% cash and 7% stock a year ago.

The company experienced an overall increase in the cost of raw materials by 20% to 25% year-on-year due to the inflation caused by dollar appreciation.