Engro to launch TFC worth Rs4 billion

KARACHI: Engro Corporation is planning to launch term finance certificates (TFC) worth Rs4 billion for retail markets.

The company intends to inject Rs3 billion into expanding its fertiliser business while the remaining Rs1 billion into food business.

The issue has a tenor of three years with a fixed coupon rate of 14.5 per cent annually. The retail TFC is a good candidate for testing possible avenues of credit availability as the company is currently constrained by slightly stretched banking channels, deteriorating private credit terms and perpetual emphasis on expansion, according to BMA Capital.

However, the fixed return of 14.5 per cent annually may not spur a huge interest as alternatives like the National Savings Scheme with lower risk profile are likely to pose a commercial challenge to the company’s issue, said BMA Capital analyst Omar Rafiq.

Engro Foods: expansion

Current expansion of Engro Foods, particularly the rice plant and an expanding distribution network, is most likely the reason behind the intended injection of Rs1 billion into the business.

Engro Fertiliser: already dangerously leveraged

Working capital requirement for the new fertiliser plant is likely the reason for extending loan to the fertiliser business.

The wing already has an outstanding debt of Rs89 billion, of which Rs63 billion worth of debt relates to the expansion of its urea manufacturing capacity, according to IGI Securities.

Engro Corporation after the demerger of the fertiliser business on June 30, 2010 did not entertain any debt either long-term or short-term and this is going to be the first issue against the assets the of parent company.

Published in The Express Tribune October 8^th, 2010.