As the demand for chicken and fish increases, so will the demand for feed
The local poultry industry size is expected to double in the next decade, whereas the current industry growth is 15 per cent per year-- and it is this anticipated blown-up demand that Index Agro Industries, a poultry and fish feed manufacturer and producer of day-old chicks, is gearing up for.
In Bangladesh, poultry is the most consumed protein, with the growing number of restaurants and changes in food habits propelling demand further.
Currently, the poultry industry size is $4.16 billion and is the second-largest contributor to the GDP after garment, according to LightCastle Partners.
As the demand for chicken and fish increases, so will the demand for feed.
At present, the combined market size of poultry and fish feed is$2.1 billion, according to a study of Brac-EPL, and over the next five years, the poultry feed and fish feed segments are expected to grow at an average rate of 5.6 per cent and 4.6 per centrespectively, as per LightCastle Partners.
Bangladesh is largely dependent on India, China and South America for feed as the local supply is insufficient to meet the demand, and it varies with seasonality.
However, to secure the local feed industry, the Bangladesh government has imposed a 5 per cent advance tax on imported raw materials, which include corn, soybean, rice barn, minerals and medicines.
Approximately 140 feed manufacturers operate in Bangladesh, with Paragon, Nourish, Kazi, CP, Aftab and Quality being the major players in the industry.
Large companies are enjoying economies of scale, while small feed manufacturers are struggling to keep up with the competitive pricing, said the Brac-EPL report.
As a result, the top 10 companies in the industry account for 75 per cent of the market.
To enhance its production capacity, Index Agro is raising Tk 50 crore from the capital market.
General investors can subscribe for a slice of Index Agro’s initial stock sale for a week from Monday at Tk 50 a share, which is a 20 per cent discount on the price the institutional investors paid.
Usually, general investors get shares at a 10 per cent discount, but Index Agro is offering a bigger discount.
Index Agro’s top line grew by a five-year compound annual growth rate (CAGR) of 11.8 per cent.
The top line refers to a company’s gross revenue or sales.
In fiscal 2016-17, the top line growth rate declined because of the volatile day-old chicks market. About one-third of Index Agro’s revenue comes from day-old chicks.
However, the year-on-year top line growth flattened in 2018-19 and 2019-20 financial years, according to the Brac-EPL study.
AFC Capital and EBL Investments are the issue managers for the company's IPO.