Political, economic uncertainty stall Suhail Jute’s land sale efforts

October 03, 2024 (MLN): Suhail Jute Mills Limited (PSX: SUHJ) reported no meaningful progress in respect of the sale of Land during the quarter ended on September 30, 2024, on the back of the political and economic uncertainties prevailing in the country and especially in Khyber-Pakhtunkhwa.

Given the high mark-up environment and budget uncertainties, investors still appear unwilling to enter into long-term commitments involving large amounts of financial resources, the Progress Report of the company further revealed. 

The principal sponsors continued to substantially increase their financial stake in the company and have injected further funds to keep the company afloat during the period under report.

However, the company is encouraged by the recent trend towards lower mark-up rates and is making renewed efforts and strenuous efforts to materialize the plan to generate the necessary funds to sustain and revive the commercial operations.

As is evident from the record, the sponsors have financially sustained the Company during the entire time it has remained non-operational and are most interested in being able to restart operations to recoup their investment and benefit all stakeholders.

To note, the plan for land development was presented to the SECP the viability of the plan was accepted by the SECP after being duly scrutinized. Based on their recognition of the viability of the proposed Plan, the SECP, on 18 April 2023, concluded their proceedings against the company initiated under Section 304 of the Companies Act 2017.

It involves the conversion of existing Land to smaller-sized industrial plots. This proposal entails the outright sale of 20 acres of land for approximately Rs480 million, with the funds generated from the sale, in turn, being applied to the costs of converting 576 kanals of Land into Industrial plots of different sizes. 

It is estimated that the proceeds from the sale of plots would be approximately Rs2.5 billion.

As indicated in the plan, the physical infrastructure required to divide the subject land into plots requires initial financial outlays, which, were to be generated by the outright sale of a parcel of land of 20 Acres.

It is projected that the finances generated from the sale of land would be sufficient to cover the most pressing and immediate liabilities and leave the company with sufficient margin to raise working capital for reviving commercial operations.

In any event, the plotting and sale of land would not impact the existing jute manufacturing and ancillary facilities, which remain intact.

The report also added that the return to commencement of commercial operations hinges entirely upon our ability to raise adequate financing for working capital and the settlement of outstanding obligations to creditors, including institutions who have secured Decrees from the Courts.

As the records show, the company has assets that have become available for disposal as a consequence of the Merger of (Colony) Sarhad Textile Mills Ltd, with and into, Suhail Jute Mills Limited.

Additionally, the company owns a fully functional Jute Manufacturing facility, which has been maintained in running order.

The existing unit is capable of generating revenue, once working capital becomes available, and commercial production recommences.

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