Engro Polymer plans to raise Rs5.4bln for expansion

KARACHI: Engro Polymer and Chemicals (EPCL) on Friday unveiled a plan to raise Rs5.4 billion to expand the company’s production capacity.

“In order to expand its PVC (polyvinyl chloride) production capacities, the board of directors decided for the expansion of the PVC plant to cater for an additional 100,000 MT (metric tons) and VCM (vinyl chloride monomer) plant debottlenecking of 50,000MT per annum,” the company said in a notice to Pakistan Stock Exchange. “The estimated overall cost of said expansion is approximately Rs7.6 billion, which is intended to be partially funded through issuance of right shares of approximately Rs5.4 billion.”

EPCL decided to issue right shares amounting to 37 percent – approximately 37 shares for every 100 shares held by the shareholders of the company.

The company is to increase the volume of shares by 245.454 million through the issuance of right shares. Its price would be Rs22/share including Rs12/share as the premium.

“The funds from the right issue will contribute towards the completion of the expansion project… which is expected to result in the overall increase in the company’s revenue and correspondingly in the profitability of the company, thereby enhancing the expected returns to the valued shareholders of the company,” EPCL said. “The right issue is being announced at a price less than the market price; hence there is minimal risk associated with the right issue. Furthermore, the company’s sponsor i.e. Engro Corporation Limited shall be subscribing to its entitlement of right shares and have even sought to subscribe to additional shares, which may remain unsubscribed.”

The company also intended to borrow Rs2.2 billion from banks to fund the expansion project.

ECPL also gave financial projections for five years related to sales and profit after taxation.

In 2018, sales are expected at Rs29.406 billion with net profit of nearly Rs3.024 billion.

By 2022, the company projected sales to reach Rs44.319 billion with net profit of around Rs4.804 billion. The company’s paid-up share capital would rise from Rs6.635 billion in 2018 to Rs9.089 billion by year 2022, it added.