Energypac begins IPO bidding Monday to energise its LPG division

Energypac Power Generation Ltd, a leading electromechanical engineering conglomerate of the country, is set to begin bidding for its initial public offering (IPO) on Monday afternoon.

The company will collect Tk150 crore from investors mainly to expand and energise its liquefied petroleum gas (LPG) business – to explore the massive growth opportunity in Bangladesh, said Humayun Rashid, managing director of Energypac.

He told The Business Standard that LPG penetration in India has reached nearly 80% because of the government subsidy there.

In Bangladesh, the penetration is now 32% without any subsidy on the fuel.

As natural gas supplied through pipelines has been facing a limitation, LPG has gained momentum in Bangladesh over the last decade. In the last six years, the annual market demand for LPG tripled to around one million tonnes.

"Because of the countrywide construction of residential buildings without access to piped gas, demand for LPG will be more than double in the next five years," Humayun Rashid believes.

With the increasing readiness of the people for convenient and cleaner cooking and vehicle fuel, the growth would be much higher if there is any government subsidy on the fuel.  

"If Bangladesh reaches 50% penetration, the market will offer us massive growth in LPG business."  

With a majority of the investors' money, Energypac will build a satellite station, popularly known as a daughter station, at Rupganj, Narayanganj with a storage capacity of 1,200 tonnes of LPG.

The Rupganj station would offer the company a cost and supply chain advantage as Energypac will carry bulk LPG to Narayanganj from its Khulna base through rivers and bottle at the strategic location.

It will also add to its existing set of cylinders and other ancillaries to support the increased scale – to more than 6,000 tonnes from the existing 5,400 tonnes.

Energypac has received approval to set up 300 LPG refuelling stations across the country and it has already entered into an agreement with the state-owned Padma Oil Company for 100 stations.

The company and its divisions

Beginning its journey in 1995 as an electrical and engineering business, Energypac has now seven different business divisions, according to an equity analysis report by brokerage firm United Securities.

Its energy and power division supplies generators, alongside providing operations, maintenance and installation services.

The motor vehicle division of the company imports, assembles and sells branded commercial vehicles and agro machinery.

Its LPG brand G Gas currently hovers between the sixth and eighth positions in terms of share in the crowded LPG market of Bangladesh.

Meanwhile, Bangladesh Brand Forum treats G Gas as one of the top-three LPG brands in the country in terms of brand equity. 

Powerpac, the pre-engineered building and steel structure brand of the group, is also gaining momentum in the market.

Energypac is a reputed company for engineering, procurement and construction of industrial establishments, especially power plants.

Its oil and gas division sells compressed natural gas (CNG), CNG station equipment and also CNG conversion kits for vehicles. 

Power, motor vehicle and LPG are the top three revenue earners for Energypac – 70% of its last year's Tk1,440 crore revenue. 

Power generation is the biggest business for Energypac in terms of revenue. Three of its power plants earn 36.7% of the company's annual revenue.  

Humayun Rashid said, "Energy and power, engineering and mechanical are the three core divisions of us and like the last 50 years, the next 50 years will also see a consistent rise in demand there. All we need is responding to the need for efficiency, both in terms of technology and business operation."

Profitability and the IPO

However, analysts are looking for higher profitability in Energypac's consolidated account.

The conglomerate's over Tk3,500 crore balance sheet with around Tk2,000 crore bank liabilities earned a net profit of less than Tk50 crore in the last fiscal year.

Humayun Rashid said the company, having some top professionals of the country in its board both as independent and shareholder directors, is working on increasing profit margin in coming days.

"All our businesses are investment-intensive and take time to maximise the return. We have already invested in diversified fields with huge growth potential," he added.

Through the 72-hour electronic bidding, going to end at 5 pm on Thursday, qualified institutional investors will determine the reference price for Energypac primary shares.

The general public will subscribe to their shares later at a 10% discount.