Shwapno, Bangladesh’s popular retail chain, is making operating profits but struggling with mounting losses due to massive loans.
Despite a 32% jump in sales, the company incurred a net loss of Tk 1.52 billion in the last fiscal year.
High finance costs stemming from a debt-to-equity ratio of 44, significantly exceeding the industry standard. This means for every Tk 1 of shareholder equity, Shwapno owes Tk 44 to creditors.
The company attributes this mainly to inter-company loans, arguing converting them to equity would significantly reduce borrowing costs. Financial experts agree, suggesting raising equity or expanding stores to boost profits and absorb finance costs.
Shwapno is optimistic, targeting to open 400 new stores annually and aiming to break even within four years. However, challenges remain, including evolving regulations and uneven VAT structures.
Despite the hurdles, Shwapno sees its growth potential attracting global investors. It’s actively considering capital restructuring to address its debt woes and fuel future expansion.