EPCL issues progress report on PVC expansion / VCM debottlenecking

August 10, 2021 (MLN): Engro Polymer & Chemical Limited (EPCL) has issued a half-yearly progress report on the issuance of Preference Shares to fund the Company’s PVC expansion/VCM debottlenecking project.

To recall, EPCL planned to raise Rs3bn by offering 300mn preference shares of the face value of Rs 10/- per share. The shares were offered through the Fixed Price Method at an issue price of Rs 10/- per share. Out of the 300 Mn preference shares, 262.500mn preference shares (87.5%) were offered to and subscribed by the Pre-IPO investors whereas 37.500mn preference shares (12.5%) were offered to the general public.

The company intended to utilize these funds for the expansion of its PVC resin capacity and for debottlenecking of the VCM plant. The total cost of the expansion was approximately Rs7.6bn, out of which Rs5.4bn was funded through the issuance of ordinary shares by way of Right Offer in 2018 and the remaining cost was funded through debt in a debt to equity ratio of 30:70. However, due to the onset of the Covid-19 pandemic and the ensuing lockdown, the target completion of the project was delayed and the estimated completion date had to be revised to 1Q 2021 from the earlier set date of 3Q 2020. This delay resulted in the cost increase of the expansion project to Rs11.95bn instead of the earlier announced cost of Rs7.6bn. The cost increase in the interim period was attributable to factors such as Rupee devaluation, project-related changes & adjustments, cost escalation due to the pandemic, and contingencies.

According to the progress report, despite the challenges posed by the pandemic, the PVC expansion project has attained Commercial Operations as of March 1st, 2021. Whereas on the VCM debottlenecking front, the Commercial Operation of the new capacity has commenced on June 25th, 2021.

Component-wise, the company will utilize 25% of the funds for the construction of VCM, 22% of the funds will be utilized for VCM DBM equipment, 37% of the Preference Shares issue will be used for Other Expenses (IDC, manpower, etc.). Whereas, the remaining 8%, 5%, and 3% of the funds would be employed for PVC III construction, Duties/taxes/salaries, and PVC III equipment respectively.

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