Gourmet Foods is interested in investing Rs 3.7 billion in the mid-sized Silk bank, which recently invited many local and foreign investors to venture for handsome returns in the highly attractive banking industry of Pakistan.
Official sources said the negotiations between the managements of Silk Bank and Gourmet Foods have been successful and as an outcome Gourmet Food will get certain shareholding in Silk Bank after necessary regulatory approvals from State Bank of Pakistan.
The investor’s eligibility will be approved by the central bank in compliance of Prudential Regulations, Fit and Proper Test (FPT) documents of the prospective investors, as sponsor shareholder of the Bank.
Officials told ProPakistan that Silk Bank’s management is welcoming to such investments, however, it is preferring its underwriter M/s. Arif Habib which also pledged to subscribe its right shares up to Rs. 6 billion that will make the overall paid-up capital of Rs. 16 billion of the bank — which is way more than the central bank set benchmark of Rs. 10 billion.
Gourmet Food will get certain shareholding in Silk Bank against its Rs. 3.7 billion but after necessary regulatory approvals from State Bank of Pakistan
Going along with M/s Arif Habib is preferred by the bank because of sound financial standing, reputation and experience in the financial market. However if M/s Arif Habib declines to subscribe to right shares of pledged Rs. 6 billion, then Silk Bank is going to close investment deal from Gourmet Foods.
Recently, Silk Bank floated 6.14 billion rights shares in Pakistan Stock Exchange against the value of Rs 1.56 per share which is discounted price of Rs 8.44 per share. Resulting, the bank raised Rs 11.9 billion from equity investors but its significant portion will be either replaced by underwriter M/s. Arif Habib or Gourmet Foods.
Silk Bank’s board called upon the underwriters M/s. Arif Habib Limited to subscribe the remaining/ unsubscribed portion of the rights Issue as per the underwriting Agreement. It further allotted 701,939,965 right shares amounting to Rs1.095 billion to Shaukat Tarin, Adviser to Chairman of Silk Bank to subscribe and/or allot/transfer all or part of the 701,939,965 rights shares to such new investor/ investors as Shaukat Tarin may deem fit.
Gourmet Foods’ venture into Silk Bank will be good initiative for its investment view point. It will not only receive good returns from bank’s profit but it could also help expanding its business at fast pace through financing and credit facility of its partner bank.
On the other hand, bank may secure its earnings through financing of partner’s projects in future.
Note: An underwriter is a company or an entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter’s distribution network. Source: Investopedia