20000323

Dewan buys

200m shares

of Dhan Fibers

HARIS ZAMIR

KARACHI: Dewan Mushtaq Group has derived the largest corporate breakthrough by acquiring 200 million shares of Dhan Fibers worth Rs 4.2 billion from Chakwal Group.

Dewan Mushtaq Group and Chakwal Group have come to an understanding whereby it would acquire majority ownership and management control in Dhan Fibers Limited, a company owned by Chakwal Group.

The deal is also strongly supported by Dewan Mushtaq Group joint venture partners-Mitsubishi Corporation of Japan. Mitsubishi is one of the largest trading houses in the world, a leader in the global polyester business.

AKD Securities, a leading brokerage house has been instrumental in arranging this transaction.

This step towards the formation of world scale industrial units in Pakistan has been welcomed and appreciated by Finance Minister Shaukat Aziz. He added that this move would open new avenues for rationalizaiton of industry in Pakistan.

Dewan is expected to purchase 200 million shares at Rs 21 per share.

The rumour of buy-out of Dhan Fibers shares by Dewan Group was pumped into the market last week. This jacked up the prices of Dewan Salman Fibers and Dhan Fibers accordingly. The share price of Dhan recorded a quantum increase of 92 percent to Rs 16.50 till March 22 while Dewan spurted by 32 percent to Rs 44.75.

A leading analyst from a local brokerage house said that the main factor behind this deal by Dewan Salman was to compete in the fiber market. Ibrahim Fibers has planned to increase its capacity to 208,500 tonnes per annum. Meanwhile, the production of Dhan Fibers is 91,000 tonnes per annum and of Dewan Salman 108,500 tonnes per annum. After this agreement, the capacity of Dewan Salman would reach around 200,000 tonnes per annum, easing the competition with the Ibrahim Fibers Limited.

The financial reports of Dewan Salman and Dhan Fibers revealed that the sales were around Rs 4.907 billion and Rs 3.674 billion during 1998-99 respectively, while net profit for the period was Rs 166 million and Rs 295 million respectively. However, the profits of Ibrahim Fiber during the last fiscal year was around Rs 556 million.

During November and December, 1999, the prices of PTA and MEG, both major raw materials for making polyester staple fiber and by-products of oil, ranged around $520 to $530 per tonne and $550-$620 per tonne respectively. The prices of these items are still unchanged.

However, there are chances that the prices internationally might face a downward correction, if the OPEC members decide to increase oil production. The meeting of OPEC members is scheduled to be held on March 28.

The strong global demand due to improving Asian economic scenario and rising raw material costs continues to push polyester staple fiber (PSF) prices upward. PSF prices in the international market have risen approximately by eight percent during the last one-month and are currently being quoted at $0.92 per kg.