Fauji Foods plans rights issue to mitigate debt level

Fauji Foods Limited (FFL), a Pakistani food company, aims to raise over Rs7.8 billion through a right-share issuance, becoming one of the latest companies tapping the capital markets to raise funding.

The company, in its latest filing to the Pakistan Stock Exchange (PSX) on Monday, said that it will issue 780,794,596 ordinary shares, at a price of Rs10/per share, aggregating Rs7,807,945,960.

The shares will be offered to the shareholders of the company in proportion to the existing number of shares held by each shareholder in accordance with the provisions of Section 83 of the Companies Act, 2017 and all applicable laws, at a price of Rs10/ per share in the ratio of 97.19916 right shares for every 100 existing ordinary shares of Rs10/-each held, against payment to the company of the price of the shares subscribed either in cash or by using a loan previously extended to the company as consideration for the rights issue, said FFL, a subsidiary of the Fauji Foundation.

The company informed that the funds raised will be utilised for the reduction in debt level, and will mitigate the adverse impact on the profitability on account of financial charges. It said that the optimised working capital will ensure smooth operations of the company, and will allow the company to maintain a healthy debt to equity ratio.

Fauji Foods Limited registered a topline growth of 39% during H1 2021 against H1 2020.

During the period under review, net revenue stood at Rs4,493 million (compared to Rs 3,229 million same period last year), leading to a gross profit of Rs 545 million, compared to a gross loss of Rs 109 million during the corresponding period of last year.

The loss after tax for H1 2021 was reduced to Rs 758 million, compared with Rs 1,779 million in the corresponding period last year.

A number of companies have tapped into the PSX to generate funds either through rights issuance or initial public offerings (IPO). Just days ago, Air Link raised Rs 6.43 billion in the book-building process of the IPO.

Air Link IPO: Book-building results in strike price of Rs71.5, offer oversubscribed 1.64 times

Bids for over 147 million shares were made against the offer for sale of 90 million shares. The company.

This was the largest IPO issued by the private sector in Pakistan. Back in 2019, textile giant Interloop Limited successfully raised Rs5.025 billion through the then-largest private-sector IPO.