GPH Ispat plans to raise Tk242cr for business expansion

GPH Ispat Limited, a leading steel manufacturer in the country, has announced plans to issue rights shares to raise Tk242 crore to enhance production capacity and meet growing demand both locally and internationally.

The decision to issue rights shares was made during a board meeting held on 22 August, according to a price-sensitive statement from GPH Ispat.

The decision aims to raise additional capital for expansion projects and enhance the company’s financial stability. The move is expected to strengthen the company’s market position and support its growth strategies in the steel industry, said the company in its statement.

According to the price-sensitive statement, the company will issue one right share for every three existing shares at Tk15 each, including a Tk5 premium. This issuance will raise Tk242 crore by offering a total of 16.12 crore rights shares.

As per capital issue rules, the company must obtain shareholder approval through an extraordinary general meeting (EGM) before issuing the rights shares. The EGM is scheduled for 20 October at 3:30pm via a digital platform, with the record date set for 18 September.

The company stated that the funds from the rights shares will be used to enhance its production capacity by setting up a new expansion plant, which is expected to generate Tk450 crore in annual revenue. However, the company did not specify how much production will increase with the new plant.

Earlier, in 2021, the company began commercial production at its newly installed state-of-the-art plant, which was built using quantum technology – the first of its kind in Asia and the second in the world – at a cost of Tk2,500 crore.

The plant’s annual production capacity is 8.40 lakh tonnes of billets and 6.40 lakh tonnes of rod and medium section products, such as BIM steel, angle, channel, and flat bar.

Consequently, the company’s total annual production capacity is 10.08 lakh tonnes of billets and 7.60 lakh tonnes of rod and medium section products.

Riding on the new plant, the company witnessed a substantial increase in revenue, which jumped fivefold to Tk5,900 crore in FY23 from FY20.

In October 2020, the company started exporting billets to China, which was the first of such export in the country’s history.

Meanwhile, GPH Ispat reported an impressive year-on-year growth in the first three quarters of FY24 riding on increased exports and local sales.

During the July-March period of FY24, the company recorded a profit after tax of Tk64 crore, a significant turnaround from the Tk31 crore loss incurred in the same period of the previous year.

The company’s improved performance was due to decreased finance costs resulting from ease in exchange loss in foreign currency transactions, GPH Ispat said in a disclosure to the stock exchange.

Besides, payment against suppliers and others during this period was less than the collection from customers resulting in a positive impact on net operating cash flow per share, according to the disclosure.

The company earlier fell into losses due to a significant increase in foreign currency conversion rate as well as a shortage of power supply which disrupted production and also affected production costs adversely.

Meanwhile, in the first three quarters of FY24, the revenue of the company increased slightly to Tk4,413 crore compared to the same period of the previous year.

Of these, local revenue stood at Tk4,360 crore and export revenue reached Tk53 crore.

The share price of the company closed at Tk27 on Thursday at the Dhaka Stock Exchange.