KARACHI, Oct 13: Nagina Cotton Mills Limited proposes to invest Rs14 million in 2 million right shares of Rs10 each, at discounted price of Rs7 in the associated company — Pacific Leasing Company Limited.

Nagina has called a shareholders’ meeting on October 26 to pass a special resolution to approve the investment in Pacific Leasing, which the company said would enable Nagina to maintain percentage of its holding in the investee company and to avail ‘possible capital gains’.

Pacific Leasing which holds total 10 million outstanding shares, has offered right shares to the shareholders at 100 per cent (one-for-one). The 2 million right shares to be picked up by Nagina Cotton works out to 20 per cent of the new shares.

Average market price of the 10-rupee share in Pacific Leasing amounted to Rs4.01 (between March 1 and August 31, 2001); the break-up value worked out at Rs15.27.

The offer price of Rs7 per share looks attractive against the book value of the Pacific Leasing scrip and Nagina has been quick to point out the benefit: “This is the opportunity to average out the cost of Pacific Leasing shares held by the company”, the company said in a statement, adding that there could be opportunity for capital gains to the benefit of the company and its shareholders, once the stock market regains their equilibrium.

Nagina Cotton also stated that the investment in Pacific Leasing would be for long term and would be made through retained earnings/local borrowings.

Pacific Leasing is one of the many leasing companies that are striving to raise their paid-up capital. Under the Leasing Companies (Establishment & Regulations) Rules, 2000, the Securities & Exchange Commission of Pakistan (SECP) had directed that minimum paid-up capital of leasing companies should be Rs200 million. The demand was in line with the Regulators’ objective of encouraging growth and strength in the financial services sector.

But long past the deadline of June 30, 2001, only 14 of the 32 listed leasing companies have been able to raise their paid-up capital to Rs200 million or more. SECP, has for the moment kept the regulation lax, but companies are trying to meet the requirement, through mergers, bonus issues and right offers. The last date for the renunciation/payment of Pacific Leasing’s current right offer is October 31.