Karachi August 7 2024: Shareholders of the Dewan Farooque Motors Limited pass a special resolution for conversion of outstanding loans from Sponsor and Associated Company Dewan Motors (Private) Limited into equity at par which is less than quarter of company’s market share price.
Shareholders approved issuance of 161,256,444 ordinary shares of Dewan Farooque Motors Limited at PKR 10/- (Rupees ten) each, total amounting to PKR 1,612,564,444/- (Rupees One Billion Six Hundred Twelve Million Five Hundred Sixty-Four Thousand Four Hundred Forty Four Only), by way of otherwise than rights.
Earlier the Board of Directors of the Company, at its meeting held on Wednesday, July 31, 2024, has approved the raising of further capital without any offer and issue of right shares, as per proposed special resolution; subject to the approval of the members of the Company, and the Securities and Exchange Commission of Pakistan (SECP).
The outstanding loan from Sponsor and Associated Company Dewan Motors (Private) Limited amounting to PKR. 1,612,564,444/-, shall be converted into ordinary shares of the Company at par value of PKR 10/- per share, without any offer and/or rights issue. Thus, the number of shares proposed to be issued to the Sponsor and Associated Company Dewan Motors (Private) Limited are 161,256,444, and the same shall rank pari passu to the existing shares of the company in all respects. This issue of shares otherwise than rights, following approval from the Shareholders, is subject to the approval of the Securities and Exchange Commission of Pakistan.
The scrip of the Company, at the close of trading hours at the Pakistan Stock Exchange Limited (PSX), on Wednesday, July 31, 2024, was PKR 40.75 per share. The preceding six-month and three-month volume weighted average price (“VWAP”) of the share at the PSX is PKR 35.50 per share and PKR 40.20 per share, respectively.
The Company is making conversion at par value. This loan was extended to the Company by the Sponsor and Associated Company Dewan Motors (Private) Limited without any security, markup/interest, and definitive terms of repayment. At the present business scenario, it is impracticable to make any prediction for the repayment of this Loan. Therefore, it would be in the better interests of the Company, as well as its shareholders, to have its liabilities reduced, enhancement in capital base, creditors comforted, and to facilitate any future business prospects, without any impact on its cash flows.
Currently, Dewan M. Yousuf Farooqui holds 63,414,268 shares, which constitutes 45.71% of the total issued capital. Under the proposed issuance, an additional 59,476,966 shares will be allocated, resulting in a total of 122,891,234 shares, thereby reducing the percentage to 40.96% of the total issued capital. Dewan Motors (Private) Limited presently holds no shares. However, they will be issued 101,779,478 shares, which will constitute 33.93% of the total issued capital.
According to regulations, the shares shall be issued to Sponsor and Associated Company Dewan Motors (Private) Limited at par, against the amount of loan extended by them to the Company. Section 2.3 states that the Sponsor and Associated Company Dewan Motors (Private) Limited, to whom these shares will be issued, have given written consent for the same. It is clarified that the new shares shall rank pari passu in all respects with the existing shares of the Company. Finally, regulations that the Sponsor and Associated Company Dewan Motors (Private) Limited are interested in the transaction to the extent of the issue of new shares in consideration of their outstanding loan amount.
