After failing to secure regulatory approval for issuing rights shares, Confidence Cement has decided to sell its entire stake in Confidence Cement Dhaka, an associate company, to meet its immediate financial obligations.
The Chattogram-based listed cement manufacturer holds a 50 per cent stake in Confidence Cement Dhaka, which it will sell to Confidence Power Holdings, another associate company under the Confidence Group, in order to repay expensive bank loans.
The transaction involves 141 million ordinary shares of Tk 10 each, amounting to Tk 1.41 billion in total, according to a stock exchange filing on Sunday.
“The entire proceeds from the sale of the associate company will now be used for the repayment of existing high-cost bank loans of the listed company,” said an official of Confidence Cement, requesting anonymity. The company expects its profitability to improve after the reduction of finance costs.
As of March this year, Confidence Cement’s short-term debts stood at Tk 5.66 billion, while long-term bank borrowings amounted to Tk 169 million.
The share sale is subject to shareholder approval at an extraordinary general meeting (EGM) scheduled for October 18, with a record date of September 24.
The decision to divest from the Dhaka plant came one and a half months after the Bangladesh Securities and Exchange Commission (BSEC) rejected the company’s rights offer application.
In September last year, the cement maker unveiled its plan to raise Tk 1.29 billion by issuing one rights share against every three existing shares. It intended to invest half the proceeds in its Dhaka plant and use the rest to repay bank loans.
However, in June this year, the newly formed securities commission rejected the application, citing a lack of supporting documents and concerns that the issuance could negatively affect profitability.
The company later revised its rights proposal, lowering the share price by Tk 10 to Tk 35 (including Tk 25 as premium), targeting Tk 1 billion. It sought reconsideration, but the regulator rejected the revised application on July 15, saying there was no scope for review.
“The board of directors of Confidence Cement on September 4 decided to sell its entire stake in Confidence Cement Dhaka to Confidence Power Holdings after the regulator rejected its rights offer for the second time,” said the company official.
Confidence Power Holdings, one of the most profitable companies in the group, operates four power plants in Bogura, Rangpur, and Chattogram with a combined capacity of 393.6MW.
Confidence Cement had initially invested around Tk 1.41 billion in the Dhaka factory. “That capital is now being pulled back to repay the listed company’s high-cost debts and support its future development,” the representative added. The ownership of the factory will remain within the Confidence Group, he clarified.
Strive to capture Dhaka’s cement market
Confidence Cement, which already holds a significant market share, had aimed to strengthen its presence in the capital-centric market by establishing a new cement plant in Narsingdi.
The plant, named Confidence Cement Dhaka, has drawn investments of about Tk 8.15 billion from the group since 2018. The factory is expected to begin operations in the first quarter of next year, with an annual capacity of 1.8 million tonnes.
While the Dhaka plant is meant to serve the capital and its surrounding areas, the listed entity will continue focusing on the Chattogram region.
Annual performance
Confidence Cement posted a 177 per cent year-on-year profit growth to Tk 753 million for FY24, driven by efficient cost management and increased income from associates.
On the back of the profit surge, the company declared a 10 per cent cash dividend for FY24, compared with 5 per cent cash and 5 per cent stock dividends in FY23.
For the nine months through March this year, its profit rose 20 per cent year-on-year to Tk 833 million.
Source: The Financial Express
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