Apparel maker aims big

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Generation Next rolls out Tk 500cr investment plan, eyes stockmarket to raise funds

Javed ChaudhurySarwar A Chowdhury

Generation Next Fashions Ltd aims to double exports to Tk 200 crore this year, with even bigger dreams for 2015 -- to hit Tk 1,000 crore in exports.

The composite knit-manufacturer specialises in producing high-value fashion fabrics, such as ladies wear.

But to turn dreams into reality, the textile maker needs huge investment, and so, it chalked out a Tk 500 crore investment plan for the next three years to expand operations.

In Bangladesh, most entrepreneurs depend on banks for a source of finance. But the entrepreneurs of this company are an exception. They are eying the stockmarket as a major source of finance.

It will go for an initial public offering (IPO) using the book-building method, a modern pricing mechanism in public offers.

"The cost of financing in the apparel industry in Bangladesh is extremely high, as the bank interest rate is high," says Javed Chaudhury, chief executive officer of Generation Next that started its journey in 2006.

"We are going to source a major portion of our required investment from the public in an effort to cut financing costs substantially," he says, sitting at his office in Baridhara DOHS.

Besides, he says, raising capital from the stockmarket will reduce the company's debt and ensure economies of scale. In other words, the per unit production cost will be low.

A stockmarket is an important source of funds for companies.

Chaudhury says his company will float 3 crore ordinary shares worth Tk 10 each under the book-building method. "We hope to raise around Tk 180 crore through the public offer."

The book-building method ensures profitability of a company, which does not want to go for IPO under the fixed-price method, to get higher prices for shares.

Generation Next recently appointed BRAC-EPL Investments as issue manager for the forthcoming IPO. Khaled Yusuf Farazi, chief executive officer of BRAC-EPL, and Chaudhury signed an agreement to this effect recently.

Presently, 27 textile companies are listed on the stockmarket. As of Thursday on the Dhaka Stock Exchange, market capitalisation of the textiles sector was around Tk 6,000 crore, which is more than 2 percent of total market capitalisation at Tk 2,77,611 crore.

Chaudhury says his company became profitable just a year after it started operations. "The journey was not easy. We had to work day and night to bring this company to its current stage."

After graduating from the University of London on Management and Industrial Relations, Chaudhury came back home as he saw huge potential in the textiles business. He joined Generation Next as a director.

"The apparel industry is the largest export earner in Bangladesh, and there is scope for us to explore new export markets," he says. "We are simultaneously focusing on high value added products as well as customers."

A rebound in apparel exports helped Bangladesh to attain 2.48 percent growth in overall exports in the first 11 months of the fiscal 2009-10, from the same time a year ago.

During July-May, of total exports worth $1,449 crore, Bangladesh fetched $585 crore from knit exports and $539 crore from woven.

Reminiscing the early days, the 25-year old says his first assignment was in human resources. He had to recruit and create a better workforce for the company. "Then, I looked after procurement to effectively source raw materials. I spent 6 months in these two areas."

In the next year and half, he focused on operations, to improve the supply chain management, enhance productivity and set effective systems and procedures from the ground level.

"Later, I looked at the marketing side, to bring maximum yield through maximum capacity utilisation," says Chaudhury, who is now the chief executive.

"We are now efficient, productive and we can produce the right products for the right customers."

Generation Next supplies to top retailers from the US and Europe, such as Tesco, Primark, Asdac, Carrefour, Walmart, United Colors of Benetton, Matalan and George.

Chaudhury thinks the main advantages for Bangladesh's apparel industry is a hardworking working population and competitive labour costs, while the high bank interest rate is the major bottleneck.

On the recent violence in the readymade garments sector, he says, "I don't think the labour unrest is fully because of workers' wages." He however does not elaborate on the issue.

"We are not a family organisation. We are a professionally run business entity and we want to be the market leader."