Berger to raise Tk300cr with rights offer to build 3rd factory

Infographic: TBS

Berger Paints Bangladesh – a publicly traded multinational company – has planned to raise Tk303 crore through a rights offer to build its third factory at the National Special Economic Zone.

The country's leading coating manufacturer has revised its rights offer plan – down from the previous target of Tk375 crore – in compliance with directives from the Bangladesh Securities and Exchange Commission (BSEC).

According to a stock exchange filing, Berger will now issue 27.28 lakh shares at Tk1,110 each, including a premium of Tk1,100. An extraordinary general meeting (EGM) is scheduled for 25 January to seek shareholders' approval.

The record date for the EGM has been set for 2 January, and shareholders whose names appear on the record date will be entitled to attend and vote at the meeting.

On Tuesday, Berger shares closed 0.09% higher at Tk1,770.50 on the Dhaka Stock Exchange.

Earlier in January, the company had decided to raise Tk375 crore by issuing 27.28 lakh rights shares at Tk1,376 each, including a premium of Tk1,366. However, the BSEC directed the company to revise its application in compliance with public issue rules.

According to a company official, another reason for the rights offer is to increase its free-float shares to 10% from the current 5%, as required by the BSEC.

Who will receive new shares  

To increase free-float shares to 10%, Berger's parent company J&N Investments (Asia) Limited, which holds a 95% stake in Berger Paints, will not participate in the rights offer.

A senior company officer told The Business Standard that under rights issue rules, J&N Investments is eligible to receive 23.18 lakh shares. However, these shares will instead be allocated to general shareholders, allowing them to receive one right for every share held. The remaining rights shares will be allocated to Berger's employees.

He further explained that, currently, Berger's employees do not hold any shares in the company. As a result, the company must find a compliant solution to enable employees to receive these shares.

Earlier, in December last year, the BSEC exempted Berger Paints from issuing rights shares to its sponsors, directors, and investors holding 5% or more shares in the company.

Tk813cr investment plan in third factory

Berger Paints has decided to invest Tk813 crore in setting up its third factory at the National Special Economic Zone.

In October 2022, the company announced through the stock exchanges its plan to invest approximately Tk480 crore to establish a third factory, with the project expected to be completed by April 2025. However, it has now revised the project cost upward to Tk813 crore and has not declared a production commencement date.

A senior officer stated that the company plans to set up an "environment-friendly" factory in the economic zone. Construction work will begin once the required funds are secured.

At the third plant, Berger Paints intends to produce decorative paint, industrial paint, marine coatings, wood coatings, construction chemicals, adhesives, and automotive paints – all of which are in increasing demand in the market.

In its annual report for FY24, which ended on 31 March, Berger Paints noted that the paint industry experienced negative growth of around 7-8% during the year due to diminished demand caused by the economic downturn, high inflation, and a slowdown in infrastructure projects.

Like other manufacturers, most paint companies are facing challenges in obtaining raw material supplies from abroad. The industry as a whole has been experiencing negative growth for two consecutive years, the report said.

To protect market share, most paint companies have adopted aggressive promotional strategies. Despite the competitive landscape, Berger has remained focused on gaining market share, the report added.

500% cash dividend in FY24

Berger Paints has approved a 500% cash dividend, amounting to Tk231.88 crore, for the fiscal 2023-24, which ended on 31 March. This represents the highest-ever payout to its shareholders in terms of the total amount.

A senior officer noted that the company had paid a 600% cash dividend in FY17. However, at that time, the paid-up capital and the number of shares were significantly lower, resulting in a smaller total dividend amount. 

Therefore, the dividend for FY24 represents the highest payout in the company's history in terms of total taka, he added.

In the last fiscal year, the consolidated net profit of Berger Paints increased by 7.72% to Tk324 crore compared to the previous financial year. Its earnings per share (EPS) stood at Tk69.92, up from Tk64.91 the previous year.

During the year, its revenue rose by 1.09% to Tk2,583 crore compared to the previous year.

In the April-September period of this year, its revenue grew by 5.41% to Tk1,265 crore, while net profit jumped by 8.57% to Tk152.55 crore compared to the same period the previous year.

As of the end of September, its earnings per share stood at Tk32.89, up from Tk30.30 a year earlier.