IFC to loan $20m to City Group for its bakery project Tk1,000cr
The International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, has announced that it is lending $20 million (about Tk 175 crore) to City Group for its 1 000 crore Tk – Rupshi Foods Ltd.
With this project, City Group – an edible oil, flour and sugar giant in the country – will enter Bangladesh’s growing bakery and noodle market.
Previously, IFC lent $22.2 million to City Group for Rupshi Flour Mills Ltd – a Tk 3,000 crore flour milling project which further cemented the group’s position in the market.
The new flour mill is equipped with machines from the Swiss company Bühler AG and is capable of producing more than 6,000 tonnes of flour under one roof per day.
Biswajit Saha, executive director of City Group, said Rupshi Foods will manufacture a wide range of high-quality bakery items, noodles and other products.
In a statement, IFC said Rupshi Foods will vertically integrate City Group’s existing flour, sugar and edible oil businesses with consumer products.
It will have the capacity to produce 6.4 tons of sweets and chocolates, 181 tons of cakes, 100 tons of biscuits and bakery products and 70 tons of condensed and powdered milk per day.
The new project will be located in the economic zone of Rupshi town, Narayanganj.
“We will be importing and installing machines soon and the brand name and product launch schedule will be announced later,” Saha told The Business Standard.
The public relations department of the IFC office in Dhaka declined to comment beyond their international disclosure at this time.
The disclosure indicates that the project estimated at $122.4 million by Rupshi Foods will be financed by total long-term debt of $83.3 million, while the remaining $39.1 million will come from equity provided by City Group entrepreneurs.
The $20 million loans committed by the IFC will have an 8-year term with a two-year grace period.
The IFC tends to lend money in foreign currencies and this is no exception, City’s Saha said.
IFC estimates that Rupshi Foods would increase Bangladesh’s GDP by $239 million annually from 2030 through its direct and indirect employment of thousands of people and its value addition.
Over the past two decades, modern factories have dramatically increased their share of the expanding market for branded bakery items, leaving behind small traditional bakers in neighborhoods across the country.
Thanks to the increased purchasing power of people who have created success stories in the business, including Olympic Industries and the market leader in Pran biscuits.
More and more conglomerates, like Akij and City Group, are entering the market with their huge investments, research and development and of course economies of scale.
Pran is marketing its premium milk chocolates at an affordable price to phase out expensive imports of premium chocolates, while a few other local and regional players are trying the same from their local factories.