KARACHI: Millat Tractors Limited (MTL) has made a significant move into Pakistan’s nascent market for electric mobility with the shareholders’ acceptance of a financing package valued at up to Rs1.5 billion for the development of an electric bicycle being undertaken by its subsidiary firm, MIPL.
The approval was part of an Extraordinary General Meeting (EGM) that took place on June 5, along with acceptance of a two-to-one stock split aimed at making the company’s stock more available to investors.
These dual announcements show that the country’s leading tractor maker seeks to boost its presence in emerging industries as well as enhance liquidity in its shares.
According to information furnished to the PSX, Millat will issue corporate guarantees and letters of comfort to ensure security for the lending institutions involved in the electric two-wheelers project of MIPL. The maximum amount of liability assumed by Millat in this connection is limited to Rs1.5 billion.
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With this move, Millat joins a list of Pakistani manufacturers that are going beyond their core businesses and preparing themselves for Pakistan’s transition into a nation of electric vehicles.
Pakistan Electric Bike Market Draws Interest
Though electric cars make up only a small percentage of the total automobiles sold in Pakistan, there is continued interest in the industry. In light of high fuel costs, increased urbanization and attempts by the government to promote green vehicles, some manufacturers have started exploring the two-wheeler segment in particular.
The industry players think that motorcycles and scooters can make the shift towards electric vehicles (EVs) in the country, which is due to their popularity in Pakistan as means of transport.
Also Read: Millat Tractors Enters Into Pakistan’s EV Bike Market With Chinese Giant
In light of the above facts, Millat’s strategy gains more importance.
The firm has been known to manufacture tractors for many years now, making itself the leader in Pakistan’s tractor market. It seems that this time, the firm is bent on using its technological expertise to carve a niche for itself in the next frontier of the Pakistani automobile industry.
The financing arrangement includes several safeguards. MIPL will indemnify Millat against liabilities arising from the guarantees, while Millat will charge its subsidiary a market-based fee for providing the support.
Millat Tractors Stock Split To Improve Liquidity
The shareholders approved not only the e-bike project but also a split in stock that would result in doubling of shares on issue.
According to the stock split plan, an ordinary share valued at Rs10 face value will be divided into two ordinary shares each valued at Rs5 face value. This means that the total authorized share capital will rise from 530 million to 1.06 billion shares, but the authorized capital will remain the same – Rs5.3 billion.
The issue and paid-up capitals shall also be subdivided, with an increase in the number of outstanding shares from about 200 million to 399 million.
A company usually carries out stock split operations as a way of improving liquidity for its shares and ensuring that it gets involved in transactions with a greater number of retail investors through reducing the share prices while maintaining its value.
This type of activity is normally interpreted by market players as an indication of confidence by management, especially when it accompanies expansions.
The latest announcements arrive at a time when investor sentiment at the Pakistan Stock Exchange has improved considerably.
Decreasing inflation, the expectation of more monetary loosening, and economic stability have once again sparked interest in stocks in several sectors.
However, in the case of Millat Tractors, the story might be far from there.
This is because the company’s move towards electric mobility shows the trend developing within Pakistan’s industries, in which manufacturing firms look for growth beyond their home base.
Of course, whether the company succeeds in its venture or not will be based on how consumers adapt to it and how soon infrastructure and policies can support electric vehicles. Despite this, it is important to note that the company is one of Pakistan’s oldest engineering companies, which sees sufficient potential in the field.
For investors, the stock split may improve trading liquidity. For the broader market, the e-bike initiative offers another indication that Pakistan’s electric mobility story continues to gather momentum.
