Envoy Textile Limited – a 100% export-oriented denim manufacturing company – has decided to issue 8.7 crore preference shares at a face value of Tk10.
The company expects to raise Tk87 crore through this, with the money raised going to finance an upcoming project expansion programme for the production of blended yarn and to repay a portion of high-cost borrowing.
The company decided to issue the preference shares on Saturday during its board of directors meeting.
The decision is now subject to the approval of the general member's meeting, and consent from the Bangladesh Securities and Exchange Commission (BSEC).
Preference shares are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued.
If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders, according to investopedia.
According to Envoy Textiles', the preference shares shall be fully redeemable cumulative non-convertible within five years.
This means the shares will not be converted into equity shares but will be redeemed as preference shares only.
As the per price sensitive information (PSI) of the company, the shares are to be redeemed at the principal amount by equal yearly installments commencing from the first year-end from the date of subscription.
The dividend will be paid semi-annually in arrears at the fixed rate.
Envoy Textile was listed on the stock exchanges in 2012.
Despite the shock from the Covid-19 pandemic, in the last 2020-21 fiscal year, Envoy Textiles' revenue increased by 5.97% over the previous year.
But its net profit fell by 65.43% due to adjustment in the provision of deferred tax on that year.
Due to the decline in net profit, the company recommended a 5% cash dividend for FY21. It paid a 5% interim cash dividend to its shareholders for that year.
Earlier in FY20, it had paid a 15% cash dividend.
On 5 May this year, it decided to set-up a spinning project expansion unit at its existing factory premises in Bhaluka, Mymensingh.
The cost of the expansion project is estimated at Tk176.19 crore.