Renata to raise Tk350cr via preference shares to repay loans

Infographics: TBS

Renata Limited, a leading pharmaceutical company, will raise Tk350 crore by issuing 35 crore preference shares at Tk10 each. This funding will be utilised to repay a portion of its outstanding short-term loans to banks.

The Bangladesh Securities and Exchange Commission (BSEC) in a meeting on Thursday (14 March), allowed Reneat to issue the preference shares through private placement for five years.

According to BSEC documents, shareholders investing in the preference shares will receive an annual dividend of 9-10%.

The preferred shares will not be added to the company's ordinary shares, also, will not be counted in its earnings per shares (EPS).

Preference shares are shares in a company where dividends are distributed to shareholders before those holding ordinary shares receive theirs.

Preference shareholders are not the owners of the company. However, they have priority over ordinary shareholders in terms of dividends and redemption rights in the event of bankruptcy.

According to the BSEC press release, the nature of preference shares is – redeemable, cumulative, non-convertible and non-participative.

That means, on maturity, the company will repurchase its shares from the investors for its redeemable nature. For its cumulative nature, the company is liable to pay the shareholders outstanding dividends in arrears, if the company does not make enough profit in a year, and the shares will not be converted to ordinary shares.

Owing to its non-participating nature, preference shareholders are not entitled to get any surplus profit other than the promised dividends.

Jubayer Alam, company secretary at Renata Limited, told The Business Standard, "Previously, we received approval from the BSEC for issuing a zero-coupon bond, which is currently being subscribed. Additionally, the BSEC has now granted permission for us to issue preference shares."

To mitigate the potential impact of rising interest rates, Renata Limited has decided to entirely pay off its outstanding short-term bank loans through the bond and issuing preference shares, he added.

In January this year, the securities regulator allowed Renata to issue a zero-coupon bond worth Tk660 crore. The bond's face value totals this amount, with the drug maker receiving Tk500 crore from the bond issuance.

Currently, the company acknowledges an indebtedness of around Tk700 crore to several banks in the form of short-term credits.

Regarding the fundraising through bond and preference shares, Jubayer Alam said the management has decided to pay off the entire short-term loan of around Tk700 crore.

According to its half-yearly financials for FY24, Renata has Tk814 crore loans as short-term.

From July to December 2023, Renata reported a growth in revenue by 17% to Tk1866.50 crore, but its profit declined 9% to Tk190 crore as raw material costs increased owing to dollar appreciation.

Meanwhile, its net profit dropped over 54% to Tk231 crore in the fiscal year 2022-23 compared to the previous. And, its earnings per share came down to Tk20.21 in FY23 from Tk44.56 in FY22.

Due to the lower profit, it paid a lower dividend than the previous year. It paid a 62.5% cash dividend for FY23, which was 140% cash and 7% stock a year ago.