ELK-Desa proposes rights issue to raise RM75m

PETALING JAYA: ELK-Desa Resources Bhd has proposed a renounceable rights issue to raise gross proceeds of RM75 million.
The exercise will involve the issuance of up to 62.5 million new shares of RM1 each on the basis of one rights share for every two existing shares of RM1 each.
"The board is of the view that the proposed rights issue is currently the most appropriate avenue of fund raising, as it will provide shareholders with the opportunity to further increase their equity participation in the company without diluting the existing shareholders' equity interest," ELK-Desa said in a filing with the stock exchange yesterday.
The proposed rights issue will also enable the group to raise funds without incurring interest cost compared to bank borrowings, for the purpose of hire purchase disbursements and to partially repay bank borrowings. It will also enable the group to strengthen its financial position with enhanced shareholders' funds and reduced gearing level.
The proposed rights issue is not expected to have an immediate material effect on the earnings of the group for the financial year ending March 31, 2016 as it is only expected to be completed in the fourth quarter of 2015.
Nonetheless, it is expected to contribute positively to the future earnings of the group when the benefits of utilisation of proceeds are utilised. The proposed rights issue is subject to shareholders' approval.