Partex Cables hunt for foreign investment to set up backward linkage

Partex Group, one of the largest conglomerates in the country, is hunting for foreign investments for its affiliate company Partex Cables to set up a backward linkage industry that will supply raw materials for manufacturing cables.

It will be the first backward linkage industry for cable manufacturing in the local market.  

Backward linkages refer to the relationship of an industry or institution with its supply chain, meaning what other products have contributed to making or producing one particular product. 

In the case of cable production, the main raw materials are copper, rubber, aluminium, thermoplastics, etc. These raw materials will be processed in the backward linkage industry of Partex. 

The business group is currently in talks with some Japanese investors, who will provide technical assistance to Partex Cables to process the raw materials of cables.

As part of this plan, the company will be listed on the stock market to enable foreign investors to evaluate the company before making investments, said Rakib Ahmed, chief financial officer of Partex Cables Limited.

Partex Cables, a leading manufacturer in the cable industry, plans to raise Tk30 crore in the fixed price method by issuing 3 crore shares at face value.

"We need a platform to explore our prospects overseas. Besides, we hope to bring some exponential partners into the business. Such business partners come with certain conditions, capital market listing being one of them," said Ahmed.

"We want to retain the company's reputation for a long time with sustainable business by getting enlisted on the market" he added.

The company, established in 2016, wants to use the initial public offering (IPO) fund for working capital and BMRE [Balancing, Modernisation, Rehabilitation and Expansion].

The cable maker achieved revenues of around Tk300 crore in the last fiscal year, while it made a net profit of 10% in revenue.

CBC Capital and Equity Management Limited will act as the collaborative investor of the company. The firm has already signed an agreement with AAA Finance and Investment Ltd for processing the issue.

Partex Star Group is one of the largest diversified private sector enterprises in the country. The group started its journey in 1962. MA Hashem was the founder and chairman of the Group. Star Adhesive Ltd, a sister concern of the group, is also listed on the bourses.

The group owns and operates 20 manufacturing, service, and trading concerns, delivering the best values to customers through its products and services.

The cable market in Bangladesh is growing at an average pace of 20% per year, thanks to nationwide electrification coupled with massive infrastructural development and burgeoning industries, including small and medium enterprises (SMEs) and the housing sector.  

Industry insiders say the size of the domestic cable market has grown from Tk2,000 crore to Tk12,000 crore over the past decade. The growing demand for raw materials is around Tk7,000 crore; 80% of raw materials are imported.

BRB Cable and BBS Cables, two big giants in the sector, have no plan to set up such a backward linkage factory now. However, had there been such a backward linkage factory in the country, the cable industry would have improved further.

More than 120 companies, including big brands, have come forward with hefty investments, creating over 50,000 jobs in the sector.

They, however, claim that local cable manufacturers have been exposed to uneven competition because of the use of imported cables in government projects.

BRB Cable Industries Limited has been leading the cable market in the country for a long time. The company, which holds over 50% share of the local market producing all kinds of cables and cable adapters, employs more than 10,000 people directly.

The cable companies import raw materials from Chile, China, India, Oman, Malaysia, South Korea and Singapore by paying duty.

BBS Cables, the second-largest cable manufacturer listed on the stock exchange, sold Tk647 crore worth of cables in the 2020-21 fiscal year. Besides, the second unit of the company – not listed on the bourses – had a turnover of Tk4,00 crore in the same year.

Industry insiders say there are at least seven grades of electrical wire in the market. There are also differences in price.

They have expressed concerns over the fact that a huge amount of cables is brought in from abroad for different government projects, notwithstanding the fact that local manufacturers are capable of meeting the entire domestic demand.

They have also alleged that low-quality products from India and China come to the market in various ways through false declarations or without declarations.

Besides, small factories built in different districts and upazilas of the country are producing low-quality non-branded cables, which also hold nearly 10% of the market share.

After BRB, BBS and Partex, Bizli Cables, a concern of Pran-RFL Group, is in a good position in the country's market. 

These companies have also demanded that locally manufactured cables be used in government projects.

The government announced the installation of underground cables in all cities to reduce the clutter of city cables.

The domestic electric giant Walton Group has also been coming into the market with this segment in recent times. The company aims to gradually produce all kinds of cables.

Apart from Walton, Partex Group and Alco Group are set to make new investments in the industry.