EcoPro BM has launched a rights offering worth 1.2 trillion won. It cited securing a nickel supply chain in Indonesia and strengthening its production base in Europe, but the market's response is chilly.
Many say the timing is premature because the electric-vehicle sector is sluggish. In fact, on the previous day, EcoPro BM's share price tumbled 20% on NEXTRADE (NXT).
Experts say it is a preemptive investment to secure mid- to long-term competitiveness, but they also analyze that a large-scale investment while the sector has not recovered could act as a short-term supply-demand burden.
According to the Financial Supervisory Service's electronic disclosure system on the 1st, EcoPro BM will conduct a rights offering via a shareholder allocation followed by a public offering of forfeited shares worth 1,199,999,988,000 won. The new issuance is 9,900,990 common shares, about 10.1% of the existing 97,830,434 shares. The planned issue price is 121,200 won per share, a 20% discount to the reference price.
◇ Difficulty raising liability-like funds…raising capital through a rights offering
Behind EcoPro BM choosing a rights offering over liability-like funding lies caution over its deteriorating financial structure. In its securities registration statement, EcoPro BM said, "For corporate bonds, there were concerns that the already expanded liability scale and the refinancing burden from the maturity of repayment of short-term borrowings would worsen the financial structure."
In fact, EcoPro BM's current liabilities due within a year total 2.1027 trillion won, about 600 billion won more than its current assets (1.4869 trillion won). Total liabilities are 3.0719 trillion won and equity is 2.0849 trillion won, putting the debt-to-equity ratio at around 150%. Generally, a ratio below 200% is considered financially sound.
A sharp rise in corporate bond market rates also played a role. As of June 30, AA- corporate bonds (unsecured, 3-year) yield 4.397%, and BBB- corporate bonds (unsecured, 3-year) yield 10.194%. Corporate bond issuance rates have been elevated since Oct. 2023. EcoPro BM's current credit ratings are Korea Ratings A (stable) and NICE Holdings A (negative), meaning it would have to bear significant interest expense if it issued corporate bonds.
Issuing mezzanine instruments such as convertible bonds (CBs) and hybrid securities is also difficult. Higher rates have increased interest burdens. The interest rate on hybrid securities EcoPro BM issued at the end of 2024 is 6%. For CBs, only about 60 billion won of issuance capacity remains under the articles of incorporation, so a change to the articles would be needed for additional issuance. If converted into shares, there is concern about dilution of existing shareholders' equity.
As for why the rights offering was conducted as a shareholder allocation followed by a public offering rather than a third-party allocation, the company said, "There are issuance limit restrictions under the Commercial Act and our articles of incorporation, and it was realistically difficult to secure a strategic investor (SI) who could inject more than 1 trillion won at once."
◇ Expanding the nickel supply chain and European production base…"strengthening mid- to long-term competitiveness"
EcoPro BM will first use the funds secured this time to acquire equity in the BNSI nickel smelter in Indonesia. The plan is to internalize the nickel supply chain, a raw material for precursors, to secure cost competitiveness. Nickel accounts for 60% of the manufacturing cost of high-nickel cathodes. Previously, EcoPro Group invested more than 780 billion won in four nickel smelters in Indonesia's IMIP industrial complex, securing supply of 28,300 tons.
This investment is a follow-up to the IMIP investment. EcoPro Group, together with PT Vale Indonesia of the state-run MIND ID group in Indonesia and Chinese battery materials company GEM, aims to secure an annual nickel supply of 36,000 tons through capital contributions. The goal is to commission one smelter line in December this year and complete it by March next year to begin ramp-up. EcoPro BM plans to secure a total nickel supply of 64,000 tons through the two industrial complexes.
It will also invest 150 billion won in mass production at its Hungary plant. EcoPro BM has pursued localizing cathode production in Europe since 2021 in preparation for the European Union's localization rules. It has invested about 1.59 trillion won to date, completed the plant in Nov. 2025, and began mass production in June. EcoPro BM expects the penetration rate of electric passenger cars in Europe to reach 30% this year, with the battery market also growing.
◇ "Strategic investments are positive…short-term dilution is a burden"
Brokerages say investment in the BNSI nickel smelter and additional investment in the Hungary plant could help boost mid- to long-term competitiveness. Park Jeong-ha, an analyst at iM Securities, said, "Nickel is one of the most important materials and supplies in the cost of high-nickel cathodes, so in the mid to long term it could contribute to stable nickel procurement and improved cost competitiveness," adding, "For the Hungary plant, the more the European electric-vehicle market recovers and the European Union's in-region supply chain rules tighten, the higher its strategic value will be."
However, it was noted that it is necessary to confirm whether BNSI actually delivers cost savings in nickel procurement after it begins operations, and whether the utilization rate of the Hungarian unit continues to improve.
In the short term, a supply-demand burden is inevitable, analysts say. Lee Jin-myeong, an analyst at Shinhan Investment & Securities, said, "It will take time for the investment effects to show up in earnings, and uncertainty remains over sector variables such as nickel prices and a recovery in electric-vehicle demand," adding, "Considering that short-term earnings per share (EPS) dilution from the rights offering is unavoidable, short-term share price momentum will be limited."