Pak Elektron plans to raise Rs5bn from Right issue

February 7, 2022 (MLN): Pak Elektron Limited (PAEL), on Monday, announced that it plans to raise Rs5billion through a right issue of 358.3 million shares at a price of Rs14 per share to enable the Company to reduce current debt levels and favourably improve its capital structure.

In a notice to Exchange, the company informed that its Board of Directors has decided to increase the paid-up share capital of the company by the issue of a further 358,330,670 ordinary shares, having face value of Rs10, as Right Shares at a price of Rs14 per share (i.e., inclusive of a premium of Rs4 per share).

The quantum of the Right Issue is 72% of the existing paid-up capital (Ordinary Shares) of the company i.e., approximately 72 right shares for every 100 ordinary shares held by the shareholders of the company.

The purpose of the Right Issue is to raise funds to enable the company to reduce current debt levels and favorably improve its capital structure, by reducing leverage in an increasing interest rate environment, meeting growing working capital requirements and achieving economies of scale and, consequentially, improving the company’s profitability and financial ratios which is expected to maximize shareholder return, the notice said.

The proceeds from the Right Issue will be utilized towards reducing the company's current borrowings and will augment the company's liquidity in a more optimal capital structure with reduced leverage.

This will improve the attractiveness of the company for investors, owing to lower finance costs and improvement in margins.

The proceeds of the right shares will also be utilized for meeting growing working capital requirements and paying for capital expenditure. The expected increase in profit, in the long run, would enhance the expected returns to the valued members and can then be available for, inter alia, distribution to the members by way of dividend and/or to meet any future capital expenditures, the notice added.

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