Minori Bangladesh Ltd, the largest shareholder of rice bran oil producer Emerald Oil Industries, has signed a three-year share purchase agreement with Dubai-based Safa Capital, seeking to sell its Tk400 crore ($47 million) worth of Emerald Oil shares. In the event of challenges in selling the shares, Minori has the flexibility to leverage them as collateral for a loan from the foreign investor, Safa Capital.

The anticipated funds from this agreement are earmarked for facilitating the expansion of Emerald Oil, a publicly traded rice bran oil producer that Minori took charge of after the defaulting sponsors abandoned the factory, leading to a six-year hiatus. Minori’s chairman, Miya Mamun, indicated that the funds would be crucial for various purposes, including settling defaulted loans from the original sponsors, such as the 30% shares held by Basic Bank.

Mamun, who is also a director of Emerald Oil, explained that the funds would play a crucial role in acquiring shares, supporting the company’s growth, and investing in undervalued shares of listed companies in Bangladesh. He highlighted the significance of the deal for the country’s financial markets, emphasizing the need for stronger foreign currency inflows.

Under the terms of the agreement, Minori would pay Safa Capital a commitment fee of 3% of the committed sum of Tk400 crore. Additionally, the parties aim to trade approximately seven times the shares compared to the daily average traded during the reference period.

As of now, Minori holds more than 39% of Emerald Oil shares, with approval granted by the securities regulator a year ago for Minori to subscribe to 3.15 crore new shares at a face value of Tk10 each. These new shares, constituting more than 30% of the total, are subject to a three-year lock-in period.

While the new shares are yet to be credited to Minori, they are expected to be a valuable asset once dividends are disbursed, according to Miya Mamun. However, Minori has the option to immediately sell over 5% of its Emerald Oil shares, with a public announcement, and the flexibility to buy more shares from the market and sell them to the foreign investor.

The securities regulations mandate a minimum shareholding of 2% for each shareholder director and a collective ownership of 30% by sponsors and directors. Last month, Emerald Oil Industries obtained regulatory approval to use sponsor-director shares, exceeding the minimum regulatory threshold of 30%, as collateral for loans, providing additional financial flexibility.

Despite the positive trajectory, Mamun highlighted that the company’s factory in the Sherpur district has experienced a production slowdown in the last one and a half months due to an acute shortage of gas. However, plans are in place to import a new husk boiler line, with coal as the primary fuel, to resume production by mid-March, doubling daily capacity to nearly four lakh tonnes.

Emerald Oil shares, with a face value of Tk10, closed 3.87% higher at Tk75.2 apiece on the Dhaka Stock Exchange on Sunday. The company, known for its Spondon branded rice bran oil, began its market presence in 2011 but went off production in 2017 following a loan scam involving its original sponsors. Minori’s involvement in 2021 led to the resumption of production and profitability for Emerald Oil.