Why two more Magura Group firms are merging
Magura Group is merging its listed companies with non-listed firms, as it claims, in an effort to improve the health of its listed firms.
Paper Processing and Packaging Limited, a firm listed on the country's stock market, is going to merge with non-listed Magura Paper Mills, both owned by the business group.
It comes days after the group decided to merge its listed entity, Monospool Paper, with Pearl Paper and Board Mills, a non-listed firm.
According to officials, the mergers are now subject to approval by the High Court and other regulatory authorities.
Keep updated, follow The Business Standard's Google news channel
Paper Processing and Packaging got listed on the stock market in 1990, and it again got relisted in June 2021.
After returning to the main board of the Dhaka Stock Exchange (DSE) from the over-the-counter (OTC) market, its share price has experienced an unusual increase.
The company's share price was Tk17.6 when it returned to the main market on 13 June but the price increased to Tk233 on 9 September 2021.
After that, the share price fell below Tk150 and on 17 October 2022, it rocketed to a maximum of Tk318.
Since then, the share price has been falling, and on Monday it ended at Tk165 at the DSE.
Company Secretary Md Mustafizur Rahman told The Business Standard, "Mergers are aimed at increasing the strength of Paper Processing. And once merged, Magura Paper Mills will also get the same status as a listed firm."
"Magura Paper's business is better than Paper Processing's. The business will be better if the non-listed company is merged with the listed one. There will also be an impact on share prices as revenues and profits increase," he added.
He said non-listed companies have to pay a higher corporate tax than their listed peers. So, once merged, Magura Paper will enjoy a tax rebate once it gets merged with Paper Processing.
"As a result, the cost will be reduced. Also, due to coming under a single management, its operating costs will also drop, which will have a positive impact on profitability," the company secretary further said.
Non-listed Magura Paper Mills has a paid-up capital of Tk36 crore, while Paper Processing's is Tk10.45 crore.
According to Mustafizur Rahman, the share exchange ratio proposed is one share of Paper Processing equal to two shares of Magura Paper Mills.
The share exchange ratio will be fixed after approval from the High Court and other regulatory authorities.
Magura Paper Mills was incorporated in 1981 but went into commercial operation in 1997.
It is now engaged in manufacturing brown paper, basically industrial-grade paper for packaging.
According to the company, Magura Paper Mills is the first project in the country to produce kraft liner and fluting medium, which are essentially required for manufacturing corrugated cartons.
The demand for these grades of paper is rising at a faster rate, which is consistent with the increase in the export of garments and shrimp.
Its manufacturing plant is situated in Meghna Ghat in Narayanganj and is capable of producing 22,000 tonnes of industrial-grade paper per year.
According to the company, in fiscal 2021-22, the revenue of Magura Paper Mills was Tk89 crore. Paper Processing and Packaging's revenue was Tk41.40 crore, which is 144% higher than the previous fiscal year.
Paper Processing and Packaging in the first half of the current fiscal year has suffered a fall in revenue and profit as its business is not going well owing to the raw materials crisis.
In the first half, Paper Processing's revenue declined by 11% to Tk24.41 crore, and profit declined by 16% to Tk1.86 crore.
