February 19, 2021 (MLN): The Board of Directors of Mughal Iron & Steel Industries Limited, in its meeting held on February 19, 2021, has approved an increase of ordinary paid-up share capital of the Company from Rs. 2,515,996,500/- to Rs. 2,918,555,940 /- by issuing of further 40,255,944 ordinary shares of the Company.
These shares, having a face value of Rs. 10/- each, will be offered as right shares at a value of Rs. 68/- per share (i.e. inclusive of a premium of Rs. 58/- per share) in a ratio of 16 right shares for every 100 existing ordinary shares of Rs. 10/- each (i.e @ 16%).
To recall, in 2017, the Company had announced the BMR of its bar re-rolling mill. Over the years, various adjustments, amendments, rupee devaluation, delays on account of a pandemic, etc. were made which resulted in significant cost escalations, which the Company had temporarily bridged financed by way of various long-term and short-term debts, with a view to replace with equity financing in the future.
Further, due to the onset of the Covid-19 pandemic and the ensuing lockdown, the target completion date of the project was delayed, and the estimated completion date had to be revised to 2Q of the calendar year 2021.
The revised total cost of the expansion is approx. Rs 3.8 billion, out of which Rs 0.76 billion was funded through the issuance of ordinary shares by way of Right Offer in 2017 and the remaining cost was bridged financed through debt.
Now, the Company intends to invest in the purchase and installation of its on-going BMR of bar re-rolling mill by way of issuance of fresh equity by retiring the associated long-term /short-term debt portion obtained on a temporary bridged financing basis.
Thus, the Company intends to utilize the proceeds of the Right Issue for retiring the associated debt (long-term/short-term) obtained for temporary bridged financing the BMR of bar re-rolling mill.
In addition to the increase in equity base, the subscription amount from the Right Issue is expected to provide relief to the Company from the burden of interest, tax, and principal repayments resulting in improved competitiveness and profitability along with improved liquidity positions as well, which in consequence would benefit its shareholders, company’s notice to PSX revealed.
It further stated that the Right Issue of the Company is being carried out at a price, which is less than the current share price in the market, and hence there is no major investment risk associated with the Right Issue.
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