Cash-strapped Lub-rref gets nod to pivot IPO funds for survival
The BSEC has allowed Lub-rref to redirect around Tk20 crore in unused IPO proceeds to settle outstanding liabilities and support working capital, but the company must return the funds to its IPO account within a year as it struggles with mounting losses and production constraints.
Lub-rref (Bangladesh) PLC has received regulatory approval to use its unutilised initial public offering (IPO) proceeds to meet working capital needs as the listed lubricant manufacturer grapples with mounting losses, a liquidity crunch and production constraints.
The Bangladesh Securities and Exchange Commission (BSEC) approved the proposal last week, a commission official told The Business Standard on condition of anonymity. The company must return the funds to its IPO account within one year.
The approval allows Lub-rref to redirect around Tk20 crore, originally earmarked for machinery purchases, project expansion and loan repayment, to settle outstanding liabilities and support day-to-day operations.
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The company's financial position remains under pressure. It incurred a net loss of Tk32.27 crore in the July-March period of FY26, with a loss per share of Tk2.22 against revenue of Tk27.11 crore.
Its shares closed at Tk12.40 on the Dhaka Stock Exchange today (13 October).
The approval could offer temporary relief by easing immediate cash-flow pressures. However, persistent losses and previous production constraints raise questions about whether the funds will be enough to restore normal operations and improve financial performance.
IPO funds remain idle after promised loan fails to materialise
Lub-rref raised Tk150 crore through an IPO in 2021. A portion of the proceeds remained unused after the company failed to secure a syndicated loan promised by Social Islami Bank PLC for the balancing, modernisation, rehabilitation and expansion (BMRE) of its project.
The unused funds are currently held in a short notice deposit (SND) account at the bank's Agrabad branch in Chattogram, generating only nominal returns, according to the company.
Lub-rref attributed the erosion of its working capital to the Covid-19 pandemic, the Russia-Ukraine war and political instability in Bangladesh in 2024. It said these disruptions weakened its financial capacity, making it difficult to sustain operations and meet financial obligations.
Under the revised utilisation plan, the company will use $364,811 of the proceeds to settle outstanding liabilities against letters of credit (LCs), equivalent to approximately Tk4.56 crore at an exchange rate of Tk125 per dollar.
Another Tk4.33 crore will be used as a down payment to reschedule long- and short-term loans under Bangladesh Bank's Banking Regulation and Policy Department (BRPD) Circular No 7. The remaining funds will be available for working capital after these payments.
The company's board approved the revised plan at its 187th meeting on 9 June, and the proposal was subsequently placed before shareholders at an extraordinary general meeting on 9 July.
According to the company's disclosures, 51% of shareholders, excluding sponsors and directors, approved the proposal.
The company said the initiative was taken in the interests of general shareholders, while the BSEC also considered the interests of ordinary investors in reaching its decision.
Production constraints and mounting losses
Lub-rref manufactures and refines lubricants under its BNO brand. Its expansion plans at Julda, beside the Karnaphuli River, included a base oil refinery, tank terminal, jetty, hydrogen plant and specialised bitumen plant.
However, dollar shortages, difficulties importing raw materials, global economic disruptions and delays in bank loan disbursements put pressure on project implementation and production.
In May 2024, the company sought permission to use Tk56 crore of its then-unutilised IPO proceeds as working capital. At the time, its chief financial officer said the company was operating at just 30%–40% of its normal production capacity.
Its financial performance subsequently deteriorated, with losses reaching Tk66 crore in FY2024-25. The latest nine-month loss indicates that the company continues to struggle to revive operations and recover revenue.
Kabir Hossain, company secretary of Lub-rref, did not respond to requests for comment on the company's current business and financial conditions.
The latest approval may help the company settle overdue liabilities, secure working capital and meet immediate financial obligations. However, it does not resolve the underlying challenges of restoring production, boosting revenue and returning to profitability.
Lub-rref must also replenish the IPO account within one year, making the effective use of the funds crucial. Its ability to revive operations and generate sufficient cash flow will be key to meeting this obligation while addressing its ongoing financial difficulties.
