November 8 -- CSR Corporation (601766.SH, 1766.HK), one of China's top two train manufacturers, obtained shareholder approval for its plan to raise nine billion yuan from a private placement, reports China Business News, citing a company filing.
The private placement plan was first proposed in June when CSR planned to raise six billion yuan from parent China South Locomotive and Rolling Stock Industry (Group) Corporation, and five billion yuan from the Social Security Fund.
CSR was forced to reduce the fundraising amount from 11 billion yuan to nine billion yuan, with the issue price cut from 6.02 yuan per share to 4.46 yuan due to the Wenzhou high-speed train collision on July 23 and the sluggish capital markets. The Social Security Fund had terminated its planned subscription.
CSR’s cash flow tightened since investments on the rail sector began to decline, and the debts of the Ministry of Railways increased, according to the report.
Through the end of the third quarter, CSR had accounts receivable of 35.09 billion yuan, while cash flow from operations decreased 13.7 billion yuan year-on-year.
The amount of funds raised from the private placement which will be injected as working capital was reduced from 2.74 billion yuan to 1.46 billion yuan, according to the company's latest plan.
Analyst Li Xuerong from ocn.com.cn said though the current round of fundraising will provide immediate relief to the company's liquidity situation, it will not be able to fully solve its cash flow problem.
CSR’s debt-asset ratio was 72.1 percent in the second quarter, and hit a historic high of 73.1 percent in the third quarter.
The private placement plan was approved by the State Council, the State-owned Assets Supervision and Administration Commission (SASAC), and is currently pending the approval of the China Securities Regulatory Commission.
Most of the funds raised will still be invested in its high-speed EMU business. Upon the completion of investments totaling 2.73 billion yuan, the company will be able to increase EMU production capacity by 100 units a year, aluminum alloy urban rail metro cars by 150 cars per year, and up its EMU maintenance capacity by 150 units year year.
Other programs to be funded through the private placement include the extension of its industry chain, the development of new businesses, and the upgrading of CSR's innovation capabilities.
Shares of CSR Corporation fell 3.55 percent to trade at 5.43 yuan per share at 13:59 today.