Issue of Equity Shares on Right Issue basis by PML Realtors Pvt Ltd., wholly owned subsidiary of the Company
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The board of PML Realtors Private Limited (PRPL), a wholly owned subsidiary of Paul Merchants Ltd, has approved a rights issue of 2,85,00,000 equity shares at Rs. 11 per share (including Rs. 1 premium over the Rs. 10 face value). The issue is in the ratio of 6 shares for every 10 shares held by existing shareholders, aggregating to Rs. 31.35 crore. Since Paul Merchants holds the entire equity in PRPL, it will be offered all 2,85,00,000 shares on rights basis. The proceeds will be used for working capital needs and general corporate purposes of the subsidiary.
Since the rights issue is by a wholly owned subsidiary and Paul Merchants is the sole shareholder, the parent will need to invest up to Rs. 31.35 crore in PRPL, meaning a cash outflow from the parent company. However, ownership of the subsidiary does not dilute. Investors should watch how this capital deployment affects the parent's cash position and future earnings from the subsidiary.