The Organic Meat Company Limited (TOMCL) has officially announced a right issue, aiming to strengthen its financial position and address future growth requirements. The company plans to issue 30 million ordinary shares at a price of PKR 27 per share, which includes a premium of PKR 17 per share. This strategic move, amounting to PKR 810 million, is a key step to enhance its operational capacity and maintain its profitability.
Key Details of the Right Issue:
- Quantum of Issue:
The right issue represents approximately 20.203% of the company’s existing paid-up capital, translating to 20.203 rights for every 100 ordinary shares held by shareholders. - Issue Price:
Each share will be offered at PKR 27, inclusive of a premium, allowing shareholders an opportunity to invest in the company at a fair value. - Total Size of the Issue:
The company will raise a total of PKR 810 million through the issuance of 30 million new shares.
Purpose of the Right Issue:
The funds generated through this right issue will primarily address the company’s short-term high-cost debt, which has been a significant financial burden. Additionally, the proceeds will be used for:
- Working Capital Requirements: Meeting increased working capital needs of the company’s animal fattening and processing business.
- New Investments: Establishing a new tripe cooking facility and a red offals processing unit.
- Future Growth: Creating a robust structure to meet current and future demand for the company’s products.
Utilization of Funds:
The primary focus of the proceeds will be on debt reduction and investment expansion. By reducing financial liabilities and funding new projects, the company aims to achieve a more balanced capital structure, ensuring steady growth and profitability.
Benefits to Shareholders:
For shareholders, this right issue presents a significant opportunity to invest in the company’s future at a discounted price. Expected benefits include:
- Profitability Enhancement: Reduced debt and improved operational capacity will contribute to higher profit margins.
- Increased Returns: Strengthening the company’s financial health directly translates into better returns for shareholders.
Risk Factors:
According to TOMCL, the right issue is priced below the current market value of the shares, minimizing investment risks. Furthermore:
- Major shareholders and directors have expressed their commitment to subscribe to their respective rights entitlements.
- Any unsubscribed portion will be fully underwritten, ensuring the success of the issue.