KUALA LUMPUR: Jerasia Capital Bhd plans to undertake a corporate exercise involving a rights issue with free warrants to raise a minimum of RM228mil to help fund its venture into the manufacturing and trading of gloves.
The company views glove manufacturing as the next step as it expands its foray in the personal protection equipment (PPE) as it shifts away from the manufacturing and exporting of fashion apparels and accessories.
As part of the corporate exercise, Jerasia will also undertake a private placement of up to 24.61 million new shares, representing not more than 30% of its issued shares to independent third party investor or investors.
Based on an indicative issue price of 40 sen per placement share, it hopes to raise RM9.8mil which will be used to pare down its borrowings and finance the glove business.
The proposed rights issue with warrants entails the issuance of up to 746.62 million rights shares together with up to 426.64 million warrants on the basis of seven rights shares together with four warrants for every one existing Jerasia share.
At an indicative issue price of 35 sen per rights share, Jerasia expects to raise RM228mil from the proposed rights issue with warrants under the minimum scenario and up to RM261.30mil under the maximum scenario.
Jerasia intends to utilise up to RM146mil to acquire, install and commission up to 10 glove dipping lines to manufacture latex and nitrile gloves.
It also intends to utilise up to RM89.90mil of the proceeds to repay part of its existing bank borrowings of RM184.40mil as at Sept 30 last year. The bank borrowings were mainly trade facilities and revolving credits for working capital purposes.
Its group managing director Pronob Sen Gupta said the expansion is synergistic for the company, which had on July 3 last year, expanded its product portfolio into developing, producing and supplying PPE.
“Since the outbreak of the Covid-19 pandemic, the demand for PPE to curb the pandemic has boosted the demand for gloves. On the other hand, our wholesaling, retailing and manufacturing and exporting of fashion apparels and accessories had been affected by the Movement Control Order.
“The glove business venture will allow us to take advantage of favourable long-term prospects for the glove industry and capitalise on the burgeoning demand for gloves while making the most out of the opportunities created by the Covid-19 pandemic, ” he added.
As the glove business is anticipated to contribute to 25% or more of the company’s net profit and net assets, Jerasia is seeking its shareholders' approval for the diversification of its business activities to include the glove business.
Under the corporate exercise, Jerasia will enter into a conditional offtake agreement with Golden Global Trading & Healthcare Sdn Bhd for the supply of gloves.
Golden Global’s core activity is original equipment manufacturing, trading, marketing of nitrile and latex gloves under the “Golden Care” brand.
Jerasia will supply a minimum 72 million boxes of latex and nitrile examination gloves within three years, with a monthly minimum volume commitment of two million boxes throughout the three years period.
Jerasia will acquire, install and commission up to 10 dipping lines in stages over the course of 12 months to manufacture latex and nitrile gloves. These 10 lines are expected to have a production capacity of approximately 8.4 million pieces of gloves per day.
The company plans to buy three acres freehold land in Negeri Sembilan for the plant.
Pronob said the company was still negotiating to finalise the proposed acquisition of the land to build a double-storey factory with built-up of approximately 75,000 square feet.
The first glove dipping lines is expected to be commissioned by the second half of 2021.
The estimated capital expenditure required to construct, install and commission all the 10 gloves-dipping lines as well as its related facilities is approximately RM146.0 million.
Golden Global has granted Jerasia the right to use its intellectual and industrial properties’ rights to market the latex and nitrile gloves manufactured by Jerasia under the “Golden Care” brand for users in the healthcare and medical industries.