Karachi June 14 2021: Dandot Cement Company Limited which is in the defaulter segment of PSX issues right shares for restructuring of its capital and repayment of its sponsor loan, as per company's notice at Pakistan Stock Exchange. The stock gained more than 20 percent since June 03 2021.
A L S O || R E A D
Domestic cement demand increased by 40.95 percent during May 2021
On June 04 2021 at company's Board meeting of other than Financials matters has decided to increase the paid up share capital of the company by issue of a further 153.3 million shares ordinary shares having face value of PKR10 per share each, as Right Shares, to be offered to the share holders. The right shares has to be issued in a proportion of 161.7 Right shares for every 100 shares.
The right shares were issued too at PKR15 per share at a premium of PKR5 per share.
This will help Dandot Cement Company Limited to raise an amount of PKR2.3 billion which is 58 percent higher than stock's market Capitalization on Jun 3rd closing at PSX.
Right proceeds will be used for re-profiling of company's balance sheet through capitalization and repayment of sponsor loan.
As per management, The Right Issue of the company is being made at a price which is in line with market price and hence there is a major investment risk associated with the subscription of Right Issue. The directors and substantial share holders have given undertakings for subscription or arrangement of 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 law.
A L S O || R E A D
OGDC rallied almost 7 percent on dividend expectation of PKR17.5 per share
Dandot cement plant has been shutdown since September 01'2019 due to extra ordinary interruptions in the production process hampering outflow of the product. The disruption in production was due to outdated equipment not performing at their desired ratings and causing unplanned shutdowns. Moreover, consistent interruptions was due to voltage fluctuations from the utility company (WAPDA).
Irregularities in voltage supply caused damage to the plant equipment, resulting in tremors and sudden stoppages of the plant. The company has also emissions which are non-compliant to the Pakistani emissions standards and thus to minimize the pollutions and damage from the emissions the plant cannot operate on an optimum level. A Balancing, Modernization, and Replacement (BMR) has to be done in order to rectify this issue.
The company sustained gross and operating loss is due to low retention of sale per bag with high input costs such as electricity and coal. The increase in electricity tariff by NEPRA combined with hike in coal prices. Hence, dividend has not been recommended by the board of directors for the current period.
In order to meet the legal standards and prevent sanctions from Environmental Department, the company decided to close down the operations and move towards upgrading the plant through Balancing, Modernization and Replacement (BMR). As per management, the company signed a Memorandum of Understanding (MOU) with renowned cement EPC contractor from China for BMR. The substantial amount has been approved by a consortium of financial institutions under the TERF scheme of State Bank of Pakistan (SBP) and remaining amount shall be arranged by the sponsors. The relevant Letters of Credit (LCs) for the BMR are being established in near future.
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