Confidence Cement seeks BSEC's reconsideration on Tk100cr rights issue plan

Confidence Cement has requested the Bangladesh Securities and Exchange Commission (BSEC) to reconsider its recent decision rejecting the company's proposal to raise Tk100 crore through a rights share issue. 

The company urged the regulator to approve the plan in the greater interest of the capital market and its shareholders. But the BSEC, through a letter issued on 29 June, rejected the company's capital raising plan stating that it was "not in a position to accord its consent".

In a letter dated 10 July, the Chattogram-based cement manufacturer requested the regulator to review its earlier stance, saying, "We believe that the decision might have been based on some misinterpretation or inadequate appraisal of supporting facts and documents."

The cement maker, a concern of Confidence Group, clarified that although its standalone net operating profit has been under pressure due to macroeconomic and sector-specific shocks – such as foreign exchange volatility and rising raw material costs – the proposed rights issue is part of a strategic financial plan aimed at strengthening the company's fundamentals.

According to the letter, 50% of the proceeds from the rights issue would be used to repay existing loans, which is expected to reduce the company's annual interest expenses by more than Tk7 crore and improve future cash flows. 

The remaining funds would be invested in Confidence Cement Dhaka Ltd, currently an associate company, to convert it into a majority-owned subsidiary.

"This strategy ensures a turnaround in core profitability and dividend-paying ability post-implementation," the letter read.

Highlighting its dividend track record, Confidence Cement stated, "Despite macroeconomic challenges, we have maintained consistent dividend payouts over the past 10 years, with an average of 23.75% – a track record unmatched by many peers. We have always prioritised general shareholders' interests and ensured transparency and prudence."

On 21 December last year, the company announced its intention to raise Tk100 crore by offering one rights share for every three existing shares, priced at Tk45 each – including a Tk35 premium. 

Later, amid capital market volatility and liquidity shortages in the capital market, it revised the offer by lowering the price by Tk10 per share to make it more accessible and to meet funding needs for its associate company.

On 3 December 2024, Confidence Cement's standing in the capital market briefly suffered as it was downgraded to the 'Z' category by the Dhaka Stock Exchange (DSE) due to a delay in disbursing approved dividends. 

The company was reinstated to the 'A' category within two days after clearing the payments.

In FY24, Confidence Cement made a profit of Tk75.33 crore with an earning per share (EPS) of Tk8.73, and it had paid a 10% cash dividend to its shareholders. 

In the first nine-months of 2024-25 ended in March, it made a profit of Tk83 crore as it reported an EPS of Tk9.67 during the July to March period. 

Confidence Group has so far invested around Tk815 crore in constructing a new cement factory near the capital, aiming to expand its business and capture a larger share of the Dhaka-centric cement market. 

The factory, located in Narsingdi, is expected to begin operations in the first quarter of next year, with an annual production capacity of 18 lakh tonnes, officials said.

Previously, in 2023, Confidence Cement had planned to raise Tk150 crore by issuing preference shares, but later dropped the plan, deeming it unsuitable, according to a company source.