Karachi September 5 2022: Board of Directors of the G3 Technologies Limited (GTECH) in their meeting held on September 05 has decided to increase the paid up share capital of the Company by issuing Class B Shares that is being offered to the existing Ordinary Shareholders by way of right in the ratio 8.8045 percent for every one share held.
The share transfer books of the Company will be closed from September 22, 2022 to September 28, 2022 (both days inclusive) to determine the entitlement of the Right Shares.
The purpose of the Issue is to incur Capital expenditure related to Calcium Carbide Project and meet working capital requirements needs.
The Company is in the process of setting up of Calcium Carbide Plant in the Hattar Industrial Estate, Haripur. Initially project was envisaged at the cost of Rs. 1,000,000,000/- (Rupees One Billion Only) and accordingly right issue was made in the last quarter of calendar year 2021. However, due to devaluation of Pakistani Rupee and global inflationary pressure, project cost is escalated. Company is in the process of disposing of its equity invest in Ghani Chemical Industrial Limited (an associated company). Approval (to dispose of the said equity investment) is already taken from the shareholders in their extraordinary general meeting held on May 07, 2022. The available funds will be utilized in the capital expenditures related to Calcium Carbide project and its working capital requirement. Total project cost of Calcium Carbide Project is Ps. 1,750,000,000 (Rupees One Billion Seven Hundred Fifty Million Only).
However,Calcium Carbide is not being produced in Pakistan. Thus, after the dollar appreciation, it is very feasible to produce (as an import substitute) locally since most of the raw materials required in the production of Calcium Carbide are locally available. Thus, throughput (sales less material cost) is substantially improved due to dollar appreciation.
As aforementioned, the funds generated from the further issue of capital will be utilized for capital expenditures related to Calcium Carbide Project (and its working capital requirement) and Management of the Company believes that such mode of financing/investment plans will contribute not only towards increased profitability that ultimately be translated into increased shareholders value.
Merger with Ghani Chemical Industries Limited
The scheme of compromises, arrangements and reconstruction for Amalgamation/Merger of GTECH with and into Ghani Chemical Industries Limited is under process of approval with honorable Lahore High Court. As aforementioned, Ghani Chemical Industries Limited deals in liquid gases and also have vast experience in the import, sales and marketing of calcium carbide and related products (and possess requisite licensing, contracts land and other resources) required for the Calcium Carbide Project. Moreover, object clause under memorandum of association also deals in chemical business. Ghani Chemical Industries Limited is profitable company and shareholders of the Company can participate in profitability of Ghani Chemical Industries Limited soon after merger. Moreover, operational, technical, financial and sales & marketing expertise of Ghani Chemical Industries Limited will be added advantage for the calcium carbide project of the Company. Thus it is expected to have positive synergies with this merger for the shareholders of both of the merging entities.
Approval of the Scheme from the shareholders is taken in the extraordinary general meeting held on May 31, 2022.
Risk attached to the project
As of date the Company does not have requisite licensing required for running of this project. Licensing is required from explosives department (Ministry of Industries). However, Ghani Chemical Industries Limited has the requisite license. The land in Hattar, Haripur selected for the project is owned by Ghani Chemical Industries Limited (GCIL).
The project is of Greenfield nature, involving many complexities, which might delay the project.
The Project is energy-intensive and the availability of electricity is the key to the success of this project, which may take time. As of date, the Company has not entered into any agreement or installed any such facility at the location but Ghani Chemical Industries Limited is entering into such agreement.
Calcium Carbide is not being produced in Pakistan. Thus, after the establishment of the Plant, the Company will have to compete with the imported sources resulting in price competition and this might impact demand of the product resultantly impacting its revenue. The economic and market condition may not be conducive at the time when the project begins its commercial production. However, after the dollar appreciation, it is very feasible to produce (as an import substitute) locally since most of the raw materials required in the production of Calcium Carbide are locally available. Thus, throughput (sales less material cost) is substantially improved due to dollar appreciation.
