GPH Ispat Limited, one of Bangladesh's leading listed steel producers, has announced its intention to raise $150 million through an initial public offering (IPO) on the Hong Kong Stock Exchange to finance a new project aimed at expanding its production capacity.

The decision to pursue the listing was approved during a board meeting held on January 23, according to a press release issued yesterday.

"This strategic move aligns with GPH Ispat's vision to expand its market footprint and enhance its corporate presence on a global scale," the company said.

To facilitate the process, GPH Ispat has appointed PricewaterhouseCoopers Ltd, Hong Kong, and Price Waterhouse & Co. Chartered Accountants LLP, India, for advisory services.

As part of this initiative, a high-level delegation from GPH Ispat Ltd is expected to visit Hong Kong this week. The delegation will be led by GPH Group Chairman Mohammed Jahangir Alam.

During the visit, the delegation will hold joint discussions with key stakeholders, including officials from The Stock Exchange of Hong Kong Ltd, Altus Capital Ltd (Merchant Bank/Issue Manager for capital raising), and Lego Corporate Finance Ltd (Underwriter).

A potential listing on HKEX will not only strengthen the company's position in the international financial market but also open new avenues for growth and investment by expanding the export basket of Bangladesh, the company hopes.

Contacted, Jahangir Alam said the funds will be used to set up a new plant with an annual production capacity of 500,000 tonnes of billet and 500,000 tonnes of rod.
The estimated cost of the project is $185 million, of which $150 million will be raised through the listing in Hong Kong, he said.

Alam said the listing process is still in its early stages and could take between six months to a year to complete.
"We are just going to start initial discussions. If the meeting is fruitful, then it will proceed, and they may seek some documents," he said.

However, Alam is optimistic about raising funds through the Hong Kong Stock Exchange, as their past dividend payment record has been strong.

GPH Ispat provided a 10 percent dividend in 2024 and a 5 percent dividend in 2023.

Alam said local stock exchanges lack the capacity to raise such a large sum.

"The Hong Kong stock market is around 100 times bigger than Bangladesh's, so it is easier for the market to absorb us," he said.

Moreover, bank loans for the project are not feasible due to high interest rates of at least 15 to 16 percent and short repayment tenures of five to six years, he added.

While foreign banks offer longer tenures of up to 12 years, repayments in foreign currency pose a significant risk given the current economic climate, he stated.

"We need equity funding, which is why we are turning to the Hong Kong Stock Exchange," he said.

He added that the annual capacity of GPH is 10 lakh tonnes, and it needs to increase to ensure business sustainability. For this reason, it is necessary to increase investment to expand manufacturing to 15 lakh tonnes.

The steelmaker, which debuted on the Dhaka Stock Exchange in 2012, reported a profit of Tk 28.75 crore in the October-December period of 2024, down from Tk 36 crore in the same period a year ago