How Minori's 7.81% stake sale will boost Emerald Oil's financial health

Infographic: TBS

The parent company Minori Bangladesh will now offload 46.66 lakh shares, representing a 7.81% stake in Emerald Oil Industries, to provide the company with a loan aimed at enhancing its financial health.

According to the decision of the Bangladesh Securities and Exchange Commission (BSEC), after selling the shares, Minori Bangladesh will provide an interest-free loan to Emerald Oil Industries.

At the current share price of Tk74.5 each, the market value of the said shares will be around Tk35 crore when sold.

And then, Emerald Oil will use the funds to repay its outstanding loans to banks, but the company will not issue any shares to Minori against the loans, according to BSEC documents seen by The Business Standard.

Earlier, Minori Bangladesh secured BSEC approval to pledge or mortgage the stake in banks to increase working capital in the company.

According to the financial statements, by the end of September 2023, the company will have a Tk130.45 crore loan from banks.

The loan was taken by its former owners, who kept their sponsor-director's share in lien; however, the owners fled the country, not paying loans to banks, and banks frozen those shares.

BASIC Bank is the main lender of the bank, including Bank Asia, Prime Finance, and Midas Financing Ltd.

As the loan was classified and lenders filed suits against the company, no interest was charged for the loan.

Officials at the company said if the company repaid the bank the loan, the finance cost would be reduced for its next financial statements.

Besides, if the company can repay Basic Bank's loan properly, the new owner will be able to take over 18% of the shares of its earlier owners.

Currently, Minori Bangladesh owns 38.26% shares of the company, of which Minori bought 7.81%, or 46.66 lakh shares, from the secondary market.

The company will follow the stock exchange listing rules to sell this share properly. The new sponsors and directors must keep over 30% of their mandatory shareholdings.

Minori Bangladesh will provide an interest-free loan for the company by selling the shares. Emerald Oil Industries will not be issued a loan against this loan.

Emerald will notify BSEC within 48 hours after fund utilisation and the shares will be sold through the block market of stock exchanges.

Minori Bangladesh – a subsidiary of the Japanese farming company Minori Co Ltd – took over the oil producer in 2021. The company invested around Tk31 crore to revive the defunct company after getting approval from the securities market regulator.

After that, in January last year, Emerald Oil Industries issued 3.15 crore of new shares in favour of Minori Bangladesh, allowing the new investors to secure a majority stake in the company's board.

This strategic move is set to elevate the company's paid-up capital from its current standing of Tk59.71 crore to a robust Tk91.27 crore.

In essence, the augmentation of Tk31.55 crore in paid-up capital was facilitated through the issuance of 3.15 crore ordinary shares, each valued at Tk10.

Emerald Oil Industries recommenced production in January 2022, but faced impediments in achieving full capacity output due to a shortage of gas. Due to the huge gas crisis, the company cannot  run properly now.

In the July to September quarter of 2023, the revenue of the company stood at Tk69.75 crore, which was Tk26.92 crore in the same period of the previous year.

Its profit after tax stood at Tk13.40 crore, and its earnings per share were Tk1.47 during the quarter.

In the FY23, the company made revenue of Tk111.52 crore, which was Tk43.35 crore in FY22.

During the fiscal year, the company recommended a 10% cash dividend for their shareholders, except for previous directors holding 29.92% shares.

Established in 2008, Emerald Oil Industries Ltd initiated the production of its Spondon-branded rice-bran oil in 2011 and ventured into the stock exchanges in 2014.

As of 29 February 2024, sponsor directors retain a 59.61% stake, institutional investors hold 6.33%, and general shareholders possess 34.06% of the company's shares.