Legacy Footwear allowed to raise paid-up capital thru new shares

Highlights

• 3 crore new shares will be issued at Tk10 each
• Tk25cr will be used to repay bank loans
• Tk5cr as working capital
• Paid-up capital will increase to Tk43.08cr
• Shares are trading at Tk97.7 each

The Bangladesh Securities and Exchange Commission (BSEC) has recently allowed Legacy Footwear to increase its paid-up capital by issuing three crore ordinary shares.

The commission issued a letter in this regard on Monday.

Legacy Footwear will issue the shares at a face value of Tk10 each to its directors, other than existing shareholders, against cash consideration through private placement.

Currently, the company's paid-up capital is Tk13.08 crore, which will reach Tk43.08 crore after the issuance of the new shares.

As a result, the company will be able to comply with the minimum paid-up capital of Tk30 core of the commission. 

BSEC Executive and Spokesperson Mohammad Rezaul Karim said out of the Tk30 crore, the company will repay its bank loan of Tk25 crore, and the remaining amount will be used as working capital.

Recently, the share price of Legacy Footwear has soared by 131% without any price-sensitive information, despite the company incurred a significant loss in the July to December period of 2022.

On Monday, its share price increased by 6.89% to Tk97.7 compared to the previous session.

Declining exports of its products and electricity disruptions in the country in the past few months have caused the firm to turn a big loss during the period.

In the first half of the ongoing 2022-23 fiscal year, the company incurred a loss of Tk1.03 crore.

In FY22, it made a loss of Tk1.12 crore which is why it did not declare any dividend in that fiscal.

But in FY21, it made a profit of Tk52 lakh and paid a 1% cash dividend to the shareholders.

The company's Managing Director, Quazi Rafi Ahmad, earlier told The Business Standard (TBS) that the demand for leather products has gone down globally. Most buyers have canceled their purchase orders.

"Also, power disruptions have hampered our production severely. We are trying to continue production with the help of gas-powered generators, which is costly."

"Although a large share is held by non-branded companies, we want to penetrate the local market as it has huge potential," he said.

"If we provide quality products at affordable prices, then it will not take us long to capture this market. And if we can capture even a small portion of this market within two or three years, our sales will increase quickly," he added.   

He said they want to start their local unit after approval from the regulator.

In January last year, Legacy Footwear decided to enter the local market by extending its plant, but the company could not start its local unit yet because of a lack of funds.

Legacy Footwear started its footwear business in 1996 as a 100% export-oriented company, but it could not establish itself in the export market. It got listed on the Dhaka Stock Exchange (DSE) in 2000.

Instead, due to low export orders, it runs production only for three to four months a year. A team from the DSE found the factory of the company closed during an inspection.

The company also mentioned in its annual financial report that the cost of exporting shoes has increased.

Companies like Apex Footwear have also focused on the local market alongside their export business. They are doing good business locally as well.