To meet regulatory requirements, Salvo Chemical Industry Ltd has revised its plan and now decides to issue shares at Tk 16 each to its existing sponsor-directors, instead of the earlier price of Tk 10 each.
In a price-sensitive disclosure on Thursday, the company referred to earlier news from May 23, and said the board of directors
decided to re-apply to the Bangladesh Securities and Exchange Commission (BSEC) with the new share price of Tk 16 each, including a premium of Tk 6.
In March this year, the BSEC asked Salvo Chemical to ensure that sponsor-directors hold a minimum 30 per cent stake in the company within a year. Currently, sponsor-directors hold 25.18 per cent, meaning the newly issued shares will help raise their stake to meet the regulatory requirement.
Following the regulatory order, the board of of Salvo Chemical had initially approved a plan on May 23 to increase the paid-up capital by issuing 6.4 million new shares to its existing sponsor-directors through a private placement at Tk 10 each.
The company then applied to raise Tk 64 million through the issuance of 6.4 million shares, but now, with the revised share price, the total amount will increase accordingly.
When the company initially decided to issue shares at face value, the share price in the secondary market was Tk 50 each, raising concerns that the move would be unfair to general shareholders, as this will result in significant dilution of earnings. General shareholders will be losers as sponsors-directors will get shares cheaply.
The increase in the number of shares will dilute earnings per share, meaning general shareholders, who currently hold a 66.44 per cent stake in the company, will have to share profits with sponsor-directors disproportionately.
However, on October 15, the securities regulator rejected Salvo Chemicals’ request to raise its paid-up capital by issuing shares at Tk 10 each to the company’s existing sponsors and directors through private placement, citing the need to protect the greater interest of general investors.
Salvo Chemical, which produces sulphuric acid, sulphate, battery-grade water and glucose, has reported a 12 per cent year-on-year higher profit to Tk 108 million in FY24, riding on higher sales.
Its first-quarter profit, however, plummeted 82 per cent year-on-year to Tk 8.45 million for the July-September period this year due to higher production costs and rising raw material prices, both locally and for imports.
The company’s stock price closed at Tk 24.1 on Thursday, losing 4.75 per cent over the day before.
