Intraco to start LPG cylinder manufacturing in January

Jun 19, 2023

Intraco Refueling Stations Limited is set to start manufacturing liquefied petroleum gas (LPG) cylinders in January next year with an expectation to exploit the growing demand for cooking gas in the local market.

Most of the machinery has already been installed for the cylinder manufacturing project, said Company Secretary GM Salahuddin, adding that some pieces of machinery are in the process, which will be completed by 2022.

"Now, we need Tk10 crore additionally for the new machinery installation. Once the project runs in full swing, it will add Tk20-25 crore to the net profit margins of the company annually," he told The Business Standard.

The company purchased an LPG cylinder manufacturing factory with a 40,000-square-feet area in Cumilla for Tk31.50 crore mostly with an initial public offering (IPO) fund.

The facility will be able to manufacture 2,500 LPG cylinders per day.

Salahuddin said, firstly, the company management thought that it will import steel plates for LPG cylinders instead of the coil as raw materials from China, and process, assemble, and finish them in the factory.

Accordingly, the machinery has been installed in the factory, as the LPG cylinder parts were considered raw materials, and only 8-10% tax was payable to the government for this, he added.

But the government has recently issued a circular saying that imported LPG cylinder parts will be considered finished products and its import duty will be 31% in total as finished products, he said.

"If we process and assemble LPG cylinders through imported parts, then we have to pay 20% additional tax. In such a situation, the company has decided to manufacture LPG cylinders with fresh raw materials like a coil. A few pieces of machinery have to be installed additionally for this."

Mainly four parts are used in LPG cylinder manufacturing – cylinder body, bottom ring, guard ring, and bung.

Last month, the firm decided to merge with its five subsidiaries to avail corporate tax benefits and reduce administrative expenses subject to approval from shareholders and regulators.

Currently, listed and non-listed companies pay corporate tax at 20% and 27.50% respectively.

Intraco Refueling Station holds more than 95% stake in those five companies. The move for a merger will help the parent company to be more profitable, expects the management.

The firm also will issue a convertible bond worth Tk50 crore for business expansion.

Recently, the stock market regulator has decided to look into the financial statements and its IPO proceeds utilisation.

Earlier, the firm, which is engaged in the fuel business through CNG stations, raised Tk30 crore from the stock market in 2018 in order to establish a bottling plant at Chattogram's Patenga.

However, it later changed the project and decided to purchase a newly-built LPG cylinder manufacturing factory after taking due approval from its shareholders.

The country's LPG market is growing exponentially. According to the LPG Operators Association of Bangladesh, the annual demand for LPG is around 12 lakh tonnes, of which 99% are imported.

In the July-March period of fiscal 2021-22, the sales revenue of the company was Tk48.32 crore, which was Tk39.08 crore a year ago.

Its net profit was Tk4.81 crore, up from Tk4.08 crore in the same period of fiscal 2020-21.

Its earnings per share were Tk0.49 and the net asset per share was Tk10.80 as of 31 March 2022.

Intraco Refueling Stations Limited / gas cylinder / Intraco / LPG