Bangladesh's Pharmaceutical Industry Faces Challenges in Fund-Raising Options

Strategic Insights -

The country's pharmaceutical industry has substantial growth potential, with a rising income population, expansion of export markets, and an increase in local demand, projected to be worth $6 billion by the end of this year. However, the sector has not yet developed the capacity to explore fund-raising options, such as initial public offerings (IPOs). Of the 200 local companies, only 19 have listed in the equity market, with insignificant fund collection through public share issues. Moreover, other instruments for capital, like corporate bonds, preference shares, private equity, and foreign direct investment (FDI), have remained largely unused.

Key Takeaways:

  • The Bangladesh pharmaceutical industry has a growth potential of $6 billion by the end of this year, as projected by the Bangladesh Investment Development Authority.
  • Despite this growth potential, only 19 of the 200 local companies have listed in the equity market, leading to insignificant fund collection through public share issues.
  • The industry has not effectively explored other fund-raising options, such as corporate bonds, preference shares, private equity, and foreign direct investment (FDI).
  • Syed M Omar Tayub, managing director of Prime Bank Investment, attributes the lack of foreign direct investments to policymakers not giving priority to the pharmaceutical sector and macroeconomic variables, including the power crisis.
  • The industry's performance is poorer when it comes to gathering funds through IPOs, with only four companies raising Tk 2.55 billion between FY22 and FY24.
  • Muhammad Zahangir Alam, chief financial officer of Square Pharmaceuticals, cites strict regulatory measures and the IPO valuation method as discouraging factors for companies to choose the equity market instead of banks for financing.
  • Lorens Shamol Mallick, company secretary of Navana Pharmaceuticals, points out that the regulatory compliance process was cumbersome, and there are hurdles even after listing, including investors who create hostile situations at annual general meetings (AGMs) to extort money.

Statistics:

  • The pharmaceutical sector is projected to be worth $6 billion by the end of this year, according to the Bangladesh Investment Development Authority.
  • The industry has grown to meet almost 98% of the local demand.
  • The pharmaceutical and chemical sector attracted FDIs worth $123.8 million in FY24, increased from $44 million in FY22.
  • Foreign investments in the pharmaceutical sector are insignificant compared to global FDIs of $1.4 trillion.
  • Four companies raised an aggregate amount of Tk 2.55 billion through IPOs between FY22 and FY24.
  • ICB Capital Management has been working to inspire pharmaceutical companies to raise funds by issuing bonds or preference shares.

Sources:

  • "The Daily Star"
  • Bangladesh Investment Development Authority
  • Bangladesh Association of Pharmaceutical Industries (BAPI)
  • Prime Bank Investment
  • Square Pharmaceuticals
  • Navana Pharmaceuticals
  • Shanta Securities
  • ICB Capital Management