Alif Industries acquiring Royal Denim, Diamond Dredging for expansion

Infographic: TBS

Alif Industries – a composite textile company manufacturing 100% export-oriented knit and woven garments – has set an ambitious plan to take over denim fabric exporter Royal Denim and Diamond Dredging to expand its capacity and diversify its business.

Following their acquisition, the non-listed private sector businesses will operate under Alif Industries, a publicly listed firm and a subsidiary of the Alif Group.

Situated in the Cumilla Export Processing Zone (EPZ), Royal Denim specialises in producing 100% export-oriented denim fabrics, currently operating with a monthly capacity of 7.50 lakh yards. On the other hand, Diamond Dredging is involved in dredging activities.

"We have recently obtained the board's approval to initiate formal discussions with the relevant parties and other stakeholders. While the acquisition deal has not been finalised yet, both parties are eager to proceed," claimed Md Azimul Islam, managing director of Alif Industries.

"The comprehensive business plan, including the acquisition cost and business feasibility, will be submitted to the board within the next 30 working days. Subsequently, the final decision regarding the acquisition will be made in compliance with relevant laws."

In a filing on stock exchanges on Wednesday, Alif Industries announced the initiation of the takeover process. The board has authorised Azimul to lead this process and directed him to submit all relevant documents, along with a detailed feasibility report, estimated purchase cost, and financing mode, within 30 working days. The board will then make further decisions based on this information.

Why is Alif taking over?

Alif Industries is in the process of acquiring both firms as part of a plan to become an integrated garment manufacturer and diversify its business, aiming to strengthen its position, expand its product portfolio, and increase value addition by up to 90%.

Previously, it decided to merge two other publicly listed entities: Alif Manufacturing Company, which produces cotton yarn of various counts, and C&A Textile, engaged in knitting, dyeing, printing, and manufacturing various types of ready-made garments, bringing them under one umbrella. The amalgamation process of these three publicly listed entities is underway.

Speaking with The Business Standard about the acquisition plan, Md Azimul Islam explained, "If the deal with Royal Denim is successfully executed, we will achieve total vertical integration in the field of woven denim fabrics. This integration will be used to manufacture denim wear for the export market, achieving 90% value addition."

He continued, "We have already taken steps to amalgamate Alif Manufacturing Company with Alif Industries. Once the amalgamation is completed, Alif will be a fully integrated garment manufacturer. The only imports required will be raw cotton, with knitting, dyeing, printing, and garmenting all being carried out in-house."

So, the value addition would be almost 90%, with the only outside purchases being accessories and a few other items. Given the current dollar crisis in the market, this would increase the company's efficiency and help avoid obstacles arising from the dollar crisis, the managing director said.

Furthermore, he emphasised, "For both woven and knit, the only imports needed will be raw cotton. This will enable the country to retain total dollar earnings from exports, as we won't have to purchase much from outside parties in China or other countries, and it will also shorten the lead time for production as everything will be done in-house."

"In addition, we are also amalgamating C&A Textiles with Alif Industries, which will increase production capacity and export figures," he added.

Regarding the acquisition of the dredging company, he stated that as part of the company's diversification process, as Bangladesh is a river-centric country, the demand for such business will always be constant. Therefore, they are acquiring two dredgers by acquiring Diamond Dredging.

Financials and stock performance

In the fiscal 2022-23, Alif's revenue reached Tk65 crore, with a profit of Tk7.96 crore. It distributed a 17% cash dividend to its shareholders for FY23.

In the July-December period of the current fiscal year, revenue slightly declined to Tk36.92 crore, but net profit increased to Tk4.78 crore.

Following the merger or acquisition with listed and non-listed entities, Alif Industries anticipates substantial growth in revenue and profit.

Despite the lack of details regarding the acquisition process, Alif Industries' shares rose 1.5% to close at Tk94.50 each on the Dhaka Stock Exchange after the announcement of the information on Wednesday.