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Berger Paints plans to raise Tk 3.75 billion by issuing rights shares at Tk 1,376 each to its employees and general shareholders; the target is to increase its free float to 10 per cent of its outstanding shares.
More than 2.7 million ordinary shares will be issued, 95 per cent of which should be offered to the owning company J&N Investments (Asia) since it has as much stake in Berger. But J&N Investments intends to distribute the shares to Berger employees and general investors so that Berger can meet the regulatory requirement of 10 per cent publicly tradable shares.
By expanding the free float, said company secretary Khandker Abu Jafar Sadique, the company would be benefitted financially as corporate tax would be cut to 20 per cent from existing 22.5 per cent.
Currently, the company's free-float on the DSE comprises 5 per cent of its total shares.
Berger has decided to offer one rights share against 17 existing shares to all shareholders. Since about 2.59 million shares meant for J&N Investments will be divided into 0.4 million for employees and 2.2 million for general shareholders, the latter ultimately will be entitled to 1 rights issue against each existing share.
The offer is subject to approval of the shareholders at the extraordinary general meeting (EGM) scheduled for March 10 and consent of the Bangladesh Securities and Exchange Commission (BSEC).
The record date for the EGM is February 14. A separate record date for the entitlement of the rights share will be declared after regulatory approval.
Meanwhile, the stock market regulator last month exempted Berger Paints from issuing rights shares to its sponsors, directors, and investors holding 5 per cent or above stake in the company.
As a result, the multinational paint manufacturer has no barrier to issuing rights shares only to general shareholders.
In September 2021, the securities regulator asked Berger Paints to ensure at least 10 per cent of its shares as free float within three years.
Berger to set up third factory
Berger Paints will construct a third factory at Bangabandhu Sheikh Mujib Shilpa Nagar at an estimated cost of Tk 8.13 billion, according to a stock exchange filing on Thursday.
The construction of the plant, which is expected to start production in April 2026, will be partially funded by the rights proceeds, said the company secretary.
The money coming from rights shares will reduce the cost of investment of the company, which in turn will boost profit, he said.
"Once the third factory comes into production, it will also have a positive impact on both revenue and profit," added Mr Sadique.
Financial Performance
Meanwhile, Berger posted a 24 per cent year-on-year growth in profit to Tk 849 million in the third quarter (Q3) through December, FY24, mainly due to a decline in raw materials' prices in the global market.
The cost of sales, which includes the cost of raw materials, stood at Tk 4.60 billion, which was 67 per cent of the total sales revenue in the October-December quarter, down from 72 per cent of the revenue in the same quarter of the previous year.
As a result, the multinational company's consolidated earnings per share stood at Tk 18.30 in the third quarter, whose financial year runs from April to March. The EPS was Tk 14.73 for the same quarter a year ago.
Berger's nine-month profit also rose 12 per cent year-on-year to Tk 2.29 billion through December. Its revenue, however, grew less than 1 per cent in the April-December period.
Despite a lower revenue growth, profit jumped for the cooling of raw materials' prices globally, said the company in its earnings disclosure on Thursday.
Following the disclosure, the stock rose 1.5 per cent to Tk 1995.4 per share on Thursday, the highest closing price in two years.
The company's annual profit rose 3.50 per cent year-on-year in the last financial year ended on March 30 last year. It paid Tk 40 per share for the year through March 2023.