Karachi December 01, 2021: In a recent notice filing Pakistan stock exchange has decided to shift G3 Technologies Limited from the defaulters to normal counter.
On November 09, 2021 PSX placed M/s. G3 Technologies Limited ("GTECH") (Formerly: Service Fabrics Limited) in the Defaulters' Segment with effect from Wednesday, November 10, 2021 on account of default of PSX Regulations 5.11.1. (b) & (i) i.e. suspended commercial production/business operations in principle line of business for continuous period of one year and adverse opinion of the statutory auditor in the audit report for the year ended June 30, 2021.
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In this context, it is hereby informed that M/s. Crowe Hussain Chaudhury & Co. (Auditor of GTECH) has shared certificate dated December 01, 2021 confirming that GTECH has resumed its business operations by initiating the trading activities which is part of the principle line of business, hence, rectified the default of PSX Regulation 5.1 1 .1 .(b).
In view thereof, GTECH shall be shifted to the "Normal Counter" of the Exchange with effect from Thursday, December 02, 2021.
GTECH has been advised to ensure meticulous compliance of all applicable Rules and Regulations so that the interests of minority shareholders remain protected at all times.
Service Fabrics Limited (SERF) was incorporated in December 1987. The principal business of the company is manufacturing and selling of fabrics as per the PSX website. The company, however, had not been operational for years. However, SERF hasn’t been involved in the fabrics business since 2004. At one point in time it had also bought a brokerage firm from Noor Capital and then ended up selling it back to Noor Capital.
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In 2016, the SECP initiated winding up proceedings on the company. Winding up is the process of dissolving a company. While winding up, a company ceases to continue with business as usual. The purpose of winding up is to sell off stocks, pay off creditors and distribute the remaining assets to shareholders. While the company could not continue its core operations since 2004, some shareholders wanted the business to go into the FMCG sector. This would have been a complete overhaul and a switch in business trajectory. Essentially, shareholders wanted to use the remaining resources of SERF to set-up a new business. For this purpose, key investors approached the Ghani Group to take over the company.
The role of management was then assumed by the Ghani Global Group which has been in the business of glass manufacturing, gas and chemical sales. The Ghani Global Group already has two listed companies, both operating in unique industries. Ghani Global Glass (GGGL) produces Ampoules and Vials for the medical industry, and Ghani Global Limited (GGL) is a holding company that owns 75% equity in Pakistan’s largest producer of medical and industrial gases-Ghani Chemicals or GCIL.
In the case of SERF, the group stepped in with an aim to revive the company. This resulted in the Lahore High Court throwing out the winding up proceedings for SERF. The court dismissed the case following shareholder approval of the revival business plan. As per SERF’s website, the company is in the process of changing its name to G3 Technologies with a revised memorandum. Spearheaded under the chairmanship of Aftab Ahmed Chaudhry, former Managing Director of the Lahore and Islamabad Stock Exchange.
At this point, the company’s financial position was weak. It had a negative net worth and liabilities of more than Rs 210 million outstanding. To make matters worse, approximately 100% shares were free float which meant no majority ownership. In the absence of majority ownership, there is unlikely to be any entrepreneurial stake or leadership to bring changes. However, what they did have was a solid business revival plan.
The revival plan for the business entails changing the name to G3 Technologies Limited in order to represent that the company is revising its intended business activities. Changes in the Memorandum and Articles of Association of the company are also subsequently needed. In addition, the authorized share capital was to increase from Rs 160 million to Rs 2500 million.
In addition, a joint venture agreement is being made with Ghani Global Holdings Limited (GGL) to make a joint investment in their “Supercapacitor project”. Super capacitors are electrochemical energy storage devices that store and release energy by reversible adsorption and desorption of ions at the interfaces between electrode materials and electrolytes. These are a modern and more efficient replacement to batteries.
The hope is that the joint venture would result in the manufacturing and sale of super capacitors which will be used in electric vehicles, solar and UPS battery solutions, telecom, micro-grid, locomotives, industrial equipment, energy harvesting, and green technology, etc. in Pakistan. They also plan to export to other countries. The joint venture will be with Kilowatt Labs Technologies Limited (KLTL) as the implanting entity.
The manufacturing facility is to be set up in Faisalabad. To get things going, the Ghani Group’s independent subsidiary, GGL, would make an investment in the now rebranded G3 Technology Limited and G3 would make a joint venture agreement with KLTL and its associates, which would bring expertise, technology, intellectual property, and territorial rights. However, KLTL would have 50% ownership despite only putting in 35% investment because of everything else they were bringing to the table. The remaining 50% lies with G3.
“We plan to capture the Rs 100 bn battery market. The start of production of the super capacitors in Pakistan will enable more efficient storage of energy,” Aftab Ahmed Chaudhry, Chairman of SERF told Profit. ”The first phase will require Rs 1,000 million project cost which excludes the capital requirement. The second and third phases include manufacturing processes and new product lines being added.”
In addition to super capacitors, there are also plans to set up a calcium carbide plant. Ghani Global is in the business of importing calcium carbide. This is primarily used for fruit ripening amongst other uses which include the manufacturing of acetylene, iron, steel, ductile steel, alloys, welding material, and cutting metals. In an attempt to substitute import, the group plans on setting up a calcium carbide chemical plant through SERF.
The country meets its entire calcium carbide demand through imports, mainly from China. This adds around $ 12-15 million annually to the nation’s import bill. The group not only plans to address local demand but aims to make exports worth Rs US$ 3-5 million every year of the chemical.
In a bid to raise funds, the company in a filing to the PSX had informed that it would issue a further 234,116,328 ordinary shares at par value (ie at Rs10 each) by the issue of right shares to be offered to the members in proportion of approximately 1,486 right shares for every 100 ordinary shares held. This means a 1486% rights issue at par value.
Rights issuance is done for existing investors. The investors had the right to subscribe or decline to subscribe. Ghani Group was able to buy approx 29% stake through investors that chose not to subscribe through its associated companies and individuals.