City Group Seeks Capital Market Pivot After Amassing Tk 26,000 Crore in Bank Debt
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Bangladeshi consumer goods giant City Group is restructuring a portion of its Tk 26,000 crore bank debt after rapid expansion and currency headwinds left it squeezed across three dozen lenders.
The maker of Teer flour, suji and soybean oil plans to raise up to Tk 1,500 crore from the capital market through an initial public offering, private equity, preference shares, corporate bonds or Sukuk.
City Group built a household staple empire over decades, but a weaker taka, delayed factory utility hookups and aggressive capital expenditure pushed its balance sheet into trouble. Around 36 commercial banks now carry the exposure. Rather than relying entirely on bilateral bank roll-overs, the group announced in mid-August that it would tap outside investors for long-term equity and debt instruments to rebalance its funding base.
The Imbalance in Corporate Funding
The conglomerate’s liquidity squeeze exposes the structural fragility of private sector financing in Bangladesh, where commercial banks supply nearly 99 percent of corporate funds while capital markets generate just 1 percent. Industrial term-loan disbursements climbed to Tk 97,138 crore in fiscal 2025. By contrast, businesses raised only Tk 302 crore through initial public offerings and rights issues during the same twelve-month stretch.
Equity markets remain sidelined across the country’s industrial sector. At the end of June, the Dhaka Stock Exchange market capitalization stood at 5.7 percent of national gross domestic product, ranking as the lowest ratio in South Asia. A World Bank survey showed that only 0.5 percent of local businesses view equity as a viable funding route, compared with 6.9 percent in neighboring India.
“Malaysia expanded its capital market to RM4.3 trillion in 2025 by creating active Sukuk and local corporate bond ecosystems with zero recorded defaults that year.”
Balance Sheets Under Borrowing Pressure
Bank loans offer fast deployment, often clearing internal approvals within three months, whereas equity listings demand nine months or more alongside rigorous disclosure filings. That speed has created deep structural hazards for supply chain operators and consumer goods manufacturers across the domestic market. Defaulted loans across the banking sector exceeded Tk 600,000 crore by the end of June, representing 32.78 percent of total outstanding credit.
Rising interest rates are accelerating the strain on operating margins. An assessment of 166 listed companies showed net finance costs surged roughly 26 percent year on year to Tk 8,871 crore in fiscal 2024-25. Perpetual loan rescheduling has shielded unhedged borrowers from formal insolvency, but it has locked commercial banks into carrying high corporate default risk on their balance sheets.
Corporates do not stop borrowing because they do not face big problems if they default; rather, banks find ways to keep the corporates alive.
Regional Lessons in Conglomerate use
Heavy reliance on bank lending mirrors earlier developmental bottlenecks seen across East and Southeast Asia. South Korean chaebols expanded rapidly on bank use before the 1997 financial shock forced aggressive balance-sheet restructuring, reduced cross-guarantees and deeper capital market compliance. Indonesia faced a similar crunch during the same period, subsequently cutting corporate bank debt dependence down to 40 percent of business financing by 2007.
Developing viable non-bank financing requires deep structural liquidity and verifiable reporting frameworks. Malaysia expanded its capital market to RM4.3 trillion in 2025 by creating active Sukuk and local corporate bond ecosystems with zero recorded defaults that year. Replicating that stability in Dhaka requires regulators to streamline listing timelines without compromising investor protections.
Next Steps for Industrial Capital
City Group’s Tk 1,500 crore fundraising rollout will serve as a test case for whether Bangladesh’s major private conglomerates can transition from short-term bank reliance to public and institutional capital. Regulators now face the task of tightening single-borrower exposure ceilings while speeding up bond and equity approvals. The key benchmark to track is whether domestic institutional funds step up to absorb the group’s planned issuance before the next debt restructuring cycle closes.