September 11, 2020 (MLN): The Board of Directors of Hinopak Motors Limited have decided to increase the paid-up share capital of the Company by issue of a further 12,400,560 ordinary shares.
These shares will be offered to the members at a face value of PKR 10/- each, as Right Shares, at a price of PKR 233.50 per Right Share inclusive of a premium of PKR 223.50 per Right Share, aggregating to PKR 2.895 billion.
The quantum of the Right Issue is 100% of the existing paid-up capital of the Company i.e. 100 right shares for every 100 ordinary shares held by the shareholders of the Company.
Meanwhile, it is pertinent to mention that the main purpose of Right issue is to reduce the debt which will result in reduction of interest expense and improvement in working capital requirements of the Company, all of the factors in combination will result in improving the financial performance of the Company.
Furthermore, the proceeds from right issue will be utilized for balance sheet re-profiling by repayment and/or adjustment/retiring the debts and certain portion will be utilized for permanent working capital needs of the Company.
This right issue will strengthen the Equity base of the company and the availability of further equity will help decrease the financial cost, strengthen overall supply chain and improve liquidity of the Company. This in turn expected to result in improvement of the performance of the Company, thereby enhancing expected returns to the valued shareholders, the company said in a notification to Exchange.
While with regards to risk factors associated with the Right Issue, the notification highlighted that the Right Issue is being made at a price which is less than current share price in the market and hence there is no major investment risk associated with the Right Issue. The directors and substantial shareholders have given undertakings for subscription of their respective right entitlements and the balance portion of the Right Issue is to be fully underwritten as per requirement of the applicable regulations.
Moreover, considering the current market price of the Company, the premium charged over the par value is justified and is also in line with the prevailing market practice, the notice said.
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