Hub Power Company Limited has announced a right issue of 12.1% at a premium of Rs. 40/share to raise its equity stake from 26% to 47.5% in China Power Hub Generation Company (CPHGC).
The Board of Directors of Hub Power Company Limited, in their meeting held on April 01, 2019, have decided to issue 12.10 Right Shares for every 100 shares held (i.e. 12.10%) at a price of Rs. 50 Per share (including premium of Rs. 40 per share).
The purpose of the right issue is to increase the investment stake in China Power Hub Generation Company (CPHGC) from 26% to 47.5%, via Hub Power Holdings Limited (HPHL), said the notification
Overall the quantum and size of the issue will be 140 million ordinary shares or 12.1 shares for every 100 shares held by the ordinary shareholders
This is expected to result in an overall increase in the company’s profitability, thereby enhancing expected returns to the valued shareholders. According to Foundation securities, this would yield an amount of Rs. 7 billion.
“Right issue of the company is being made at a price which is far less than current share price in the market and hence there is no major investment risk associated with the Right Issue,” the notification read.
The premium charged over the par value is in line with the market practice for the last two years.
“Normal risks associated with the business will remain, however, the Company is well placed in the market with a proven track record which will help mitigate such risk factors,” it further added.
At the time of filing this report, HUBCO’s shares at the bourse were trading at Rs. 76.99, up by Rs. 3.66 or +4.99% with a turnover of 1.47 million shares on Monday.