Meghna Group has diversified its business across multiple industries, including consumer goods, cement, chemicals, poultry, shipbuilding, energy, real estate, and more. It has over 30 business units operating in its industrial parks. While consumer goods is still a major segment, the group's revenue is balanced across segments, indicating a moderate level of diversification.
DSE and CSE indexes declined in the second quarter of 2018. The DSEX lost 5.9% while the CASPI fell 6.5%. Sector P/E ratios showed travel/leisure, tannery, and food/allied sectors had the highest ratios, while banks, fuel/power, and insurance had the
1. Capital Market Movement in
Bangladesh:
Quarterly Analysis of DSE
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pg 3
April - June 2018
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Corporate Level Strategy:
How diversified is Meghna Group?
Cross Border Acquisition by Akij:
First ever Experience by a
Bangladeshi Firm pg 10 ...
3. April - June 2018
Corporate Level Strategy:
How diversified is
Meghna Group?
Page 3
By CRISL Research Team
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4. Introduction
Typically, a particular corporate adopts corporate level strategy by diversifying its business into different industries or
sectors to exploit competitive advantages. For last two decades, a good number of business groups have been
emerged in the fastest growing economy of Bangladesh. These emerging corporate groups have been expanding
their business operations into various sectors. As diversification strategy has the possible impact on corporate perfor-
mance and its sustainability, this is critical to understand how Bangladeshi corporates are adopting corporate level
strategy by diversifying their business operation to achieve their sustainable business growth and performance.
Therefore, the purpose of this paper is to focus on a fast growing corporate of Bangladesh namely“Megna Group of
Industries”to explore its corporate diversification strategy.
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CRISL Business Review, April - June 2018
Corporate Level Strategy: How diversified is
Meghna Group?
At present, Megna Group is one of the fastest growing business conglomerates in Bangladesh. This business group
started its journey back in 1976 by Mr. Mostafa Kamal, a successful entrepreneur. Though this group started its
operation with trading business by incorporating Kamal Trading Company, it has expanded its business into different
manufacturing areas including consumer-goods, cement, chemical, poultry, ship building, shipping, energy & power,
securities, insurance, aviation, media and economic zone.
Though this group started its operation with trading business by incorporating
Kamal Trading Company, it has expanded its business into different manufac-
turing areas including consumer-goods, cement, chemical, poultry, ship build-
ing, shipping, energy & power, securities, insurance, aviation, media and eco-
nomic zone.
“
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Over the period of more than 40 years of business, Megna Group has established the strong corporate brand in the
emerging economy of Bangladesh. At the early stage, Megna group has set up Meghna Vegetable Oil Industries Ltd in
1989. Since then, this group has created the dominant position in the fast growing consumer-goods market in Bangla-
desh. “Fresh”, “No 1” and “Pure” are three highly influential and established brand names of the Megna Group in the
consumer-goods market of Bangladesh.Megna Group has 30 business operating units located in in its own industrial
park of 2,000 bigha land at Narayanganj. Very recently, this group has established 8 more manufacturing plants in its
two special economic zones such as Meghna Economic Zone (MEZ) on 245 acres and Meghna Industrial Economic
Zone (MIEZ) on 80 acres both of which are situated at Sonargaonupazila in Narayanganj.In 1996, Megna group diversi-
fied its business into inestablishedBangladesh National Insurance Company Limited. Moreover, this group has estab-
lished Dhaka Securities Limited in 2009 to extend its business in financial market of Bangladesh.
By establishing Meghna Properties Limited in 2007, Megan group has also expanded its business in the real estate
industry.Megna Group enter into the Poultry and Fish Feed business by establishing United Feeds Limited and Unique
Hatchery & Feeds Limited in 2001 and 2003 respectively. Tanveer Paper Mills Limited and Meghna Pulp & Paper Mills
Limited were established in 2004 and 2012 respectively by Megan group to engage in the fast growing paper industry
in Bangladesh. In addition, the group establishedTasnim Chemical Complex Limited in 2009 with an intention to enter
in Chemical Industry of Bangladesh. Megna group has diversified its business into power generation sector by estab-
lishing Unique Power Plant Limited comprising of of Unit 1 27.65 MW and Unit 2 of 6 MW in 2001. In 2008, the group
has also established Everest power Generation Company Limited with capacity of 54 MW.
5. CRISL Business Review, April - June 2018
Corporate Level Strategy: How diversified is
Meghna Group?
Page 5
In sum, Megna Group has diversified its business mainly into consumer goods & food, engery& power, real estate &
services, and other manufacturing sectors. This well reputed business conglomerate of Bangladesh, indeed, has
expanded its business through diversifying its operation into different related and unrelated sectors. Though Megna
Group has been well known for its consumer-goods brand“Fresh”, total revenue of this group does not depend on a
particular segment of business significantly. Moreover, the group depends on its different segments of business in a
balanced way to generate its revenue which, in turn, suggests the moderate level of business diversification of Megan
Group.
Figure 1: Corporate Level Diversi�ication of Megna Group
6. Capital Market Movement in
Bangladesh:
QuarterlyAnalysis of Dhaka
Stock Exchange (DSE)
Abdullah Al Masud &
Mohammad Azhar Hossain,
both are Lecturers of Southeast Business School, Southeast University
By Abdullah Al Masud &
Mohammad Azhar Hossain
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7. Page 7
CRISL Business Review, April - June 2018
Capital Market Movement in Bangladesh:
Quarterly Analysis of DSE
Market Movement
Stock exchanges in Bangladesh are passing testing times in recent times. In Dhaka Stock Exchange, the broad index
(DSEX) shed around 849 points in the last 6 months reaching 5405 points in June 28, 2018 from 6254 points in January
1, 2018. The market is testing investor’s sentiment as market has been on a decline trend since reaching its 5-year peak
back in November 2017. Similar movements have also been found in CASPI- the broad index in Chittagong Stock
Exchange (CSE) (See Figure 1).
During the months from April to June of 2018, the index returns in the two markets have been mostly negative (See
Figure 2)
Major BD Indices Movement
Figure 1 Broad Index of DSE and CSE
Index Returns DSE and CSE
Figure 2 Market Returns Movement in JApr’18 and Jun’18
8. Page 8
CRISL Business Review, April - June 2018
Capital Market Movement in Bangladesh:
Quarterly Analysis of DSE
From Apr 1, 2018 to Feb 28, 18, DSEX lost 5.9% where as CASPI lost 6.5%. Interestingly, DS30, CSE50, CSE30 Indices lost
more points (see Table 1) than the overall market index both the markets. These indices normally include stocks with
large market capitalizations, high liquidity with positive financial performance. This phenomena suggests investors’
disinclination towards such companies during the period.
The top 10 losing stocks were mostly from textile sector and financial institutions (popularly NBFIs) sector. The losing
stocks mostly comprised of the‘Z’Category stocks.
Macro Economic Changes
Dhaka Stock Exchange (DSE) has created the history by signing the share purchase agreement on Monday 14th of May
2018 with the Chinese consortium as the strategic partner of country’s premier stock exchange.
In the month of June, the Finance Minister of Bangladesh, Mr. Abul Maal Abdul Muhith announced National Budget of
Bangladesh for Fiscal Year 2018-2019 amounted taka 464500 crore taka which is 16 percent higher than the previous
fiscal year. After the declaration of budget on 7th June 2018, DSEX index went down for consecutively two working
days from 5366.66 to 5326.44 and CSCX index went down for consecutively two working days from 10012.22 to
9915.49.
Top 10 Gainers and Top 10 Losers
During the second quarter of 2018, top 10 gaining stocks comprised mostly of the ‘A’ category stocks from different
sectors such as engineering, textile etc. (see Table 2).
Table 1 Index Performance from Apr 1, 18 to Jun 28, 18
Table 2 Top Gainers and Losers in Apr-Jun, 2018
9. Sector Price/Earnings (P/E) Ratio
Sector P/E ratio data (see Figure 3) from DSE illustrate that travel & Leisure, tannery, and Food & Allied sector stocks on
average had 3 highest P/E ratios where Bank, Fuel & Power, and Insurance sector stocks have the lowest P/E ratios.
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CRISL Business Review, April - June 2018
Capital Market Movement in Bangladesh:
Quarterly Analysis of DSE
Recent IPOs
N.B Views expressed are absolutely authors’own and doesn’t reflect the opinions of authors’institution or of CRISL.
Authors don’t take responsibility for investors’decision making based on the expressed views.
Figure 3 Sector Median P/E [Based on audited �inancials’ basic EPS]
Figure 3 also shows the movement of the P/E ratio of various sectors from two points of time- April 5, 2018 and July 1, 2018.
Most notable movements were in travel & leisure and food & allied sectors where P/E ratio declined; on the other hand, the
ratio increased for cement sector. Overall Market P/E decreased slightly from 22.x to 20.9x.
Company Industry Offer Price
(Tk)
Issue Size (Tk) Purpose of Fund
SK TRIMS &
INDUSTRIES
LTD.
Textile 10 300,000,000 Proceeds from Initial Public Offering
(IPO) will be used for acquisition of
Machinery & Equipment, Construction
of
building and other civil works and for
IPO Expenses
VFS Thread
Dyeing Limited
Textile
10 220000000 Proceeds from the IPO funds will be
utilized in acquisition of capital
machinery, repayment of partial long
term loan and for IPO expenses.
Aman Cotton
Fibrous Limited
Textile 36 800000000 Net proceeds from Initial Public
Offering (IPO) will be used for
acquisition & installation of brand new
European machineries for expansion
of existing project by increasing its
capacity,
repayment of existing long term loan
and defraying the IPO expenses
10. Cross BorderAcquisition by
Akij: First ever Experience
by a Bangladeshi Firm
By CRISL Research Team
Page 10
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11. Page 11
CRISL Business Review, April - June 2018
Cross Border Acquisition by Akij: First ever Experience by
a Bangladeshi Firm
Akij Group, Bangladeshi corporate giant, acquired two Malaysian companies namely Robin Resources and its subsidi-
ary Robina Flooring with USD 77 million. This is the first ever overseas acquisition-deal by a Bangladeshi company.
Akij Group is one of the leading corporates in Bangladesh involves in diversified business operation including
tobacoo, jute, textile, steel, particle boards etc. In addition, Akij Particle Board Mills Limited is the subsidiary of Akij
group manufactures and distributes the Plain Board, Melamine Board & Flush doorfor more than fifteen years. On the
other hand, Robin Resources Malaysia and its subsidiary Robina Flooring both of which manufacture MDF board and
wood floor tiles and different wood products and export to about 60 countries with annual revenue of USD 16 million.
Indeed, as a pioneer, Akij group involves in cross broader acquisition in line with its prior business experience in the
MDF board manufacturing sector.
This USD 77 million acquisition deal was financed by internal sources of Akij as well as external financings from
international market. Akij provided USD 20 million from its ERQ (exporters' retention quota) account after taking
special permission from Bangladesh Bank (BB) for the investment. In addition, the company borrowed USD 24.50
million from German development finance institution DEG, which is a concern of Germany's kfw, a German
government-owned development bank, USD 13.50 million from Standard Chartered Bank Malaysia Berhad and USD
10 million from a UK-based company. The remaining amount of the deal would be financed from the dividend of two
acquired companies.
Though cross-broader acquisition is a common strategy can be seen in the developed economy, this acquisition is the
first ever experience for any Bangladeshi company. Indeed, this is a great move for Akij Group to upholding its
business image in the global business community. This first mover experience can help other local corporates to
apply acquisition strategy in future for their business growth as well. However, the future success of this acquisition
deal can sustain the credible image about the capability of Bangladeshi corporate to operate business in the interna-
tional context.
This USD 77 million acquisition deal was financed by internal sources
of Akij as well as external financings from international market. Akij
provided USD 20 million from its ERQ (exporters' retention quota)
account after taking special permission from Bangladesh Bank (BB)
for the investment.
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