Metrod Holdings Berhad: Detailed Report on Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions (RRPTs)

Summary of Key Points

• Annual General Meeting (AGM): Metrod Holdings Berhad (“Metrod”) will hold its 15th AGM on 26 May 2026, 2.00 p.m. at The Ritz-Carlton, Kuala Lumpur, where the renewal of the shareholders’ mandate for RRPTs will be tabled.
• Objective: The Company seeks shareholder approval for the renewal of the existing mandate, allowing Metrod Group to enter into recurrent related party transactions (RRPTs) of a revenue or trading nature with specified related parties.
• Scope of RRPTs: The transactions mainly involve the sale and purchase of copper goods (strips, rods, wires, bars, scraps, cathodes, etc.) between Metrod Group and MetTube Group, both significant shareholders and related entities.
• Financial Impact: The proposed renewal is not expected to affect the share capital or substantial shareholders’ holdings but is anticipated to contribute positively to the Group’s earnings and net assets.

Detailed Information for Investors

1. Background and Rationale

The mandate for RRPTs, first approved at the 14th AGM, will lapse unless renewed at the upcoming 15th AGM.
These RRPTs are necessary for Metrod Group’s day-to-day copper manufacturing operations, allowing flexibility and efficiency in transactions with MetTube Group, which is a major shareholder holding 31.59% of Metrod, and Metdist S.A., holding 42.13%.

2. Nature and Value of RRPTs

• Actual Transactions (26 May 2025 to 31 March 2026):
  • Sales to MetTube Group: RM9.75 million
  • Purchases from MetTube Group: RM932.51 million
• Estimated Transactions for Next Mandate Period:
  • Sales to MetTube Group: RM390.49 million
  • Purchases from MetTube Group: RM542.03 million
• Copper goods traded include strips, rods, wires, bars, scraps, and cathodes.

Transactions are made on normal commercial terms, not more favourable to related parties than those available to the public, and are not detrimental to minority shareholders.

3. Procedures and Safeguards

• All RRPTs are reviewed for pricing and quality. At least two other comparable transactions with third parties are used as benchmarks where possible.
• Transactions exceeding RM1 million or 1% of relevant ratios require Audit Committee review.
• Quarterly reviews by the Audit Committee and internal audits are conducted to ensure compliance.
• Interested directors and major shareholders must abstain from deliberation and voting on RRPTs.
• Disclosure of RRPTs will be made in the annual report, including breakdowns by type, party, and relationship.
• Immediate announcement to Bursa Malaysia if actual transaction value exceeds estimates by 10% or more.

4. Shareholder and Board Interests

• Major Shareholders:
  • MetTube (31.59%), Metdist S.A. (42.13%)—will abstain from voting on the resolution.
• Interested Director:
  • Mr. Raghvendra Mittal (Non-Independent Executive Director) is also a director of MetTube and its subsidiaries and will abstain from all deliberations and voting related to RRPTs. He holds 0.004% of Metrod shares directly, with no direct interest in MetTube Group.

5. Litigation and Regulatory Matters

• Pending Litigation in India:
  • Countervailing duties imposed on copper wire exports from Malaysia (and other countries) to India were set aside by CESTAT in 2021, but the Indian Supreme Court is yet to list the next hearing.
  • Subsidiary Savli Copper Products Pvt Ltd received demand notices for CVD totaling approximately RM10.2 million in 2024. The High Court of Gujarat has granted an interim stay; Karnataka proceedings are ongoing.
  • Income tax draft assessment for FY2021-2022 proposes an adjustment with a tax impact of ~RM3.8 million. Company has appealed and paid 20% as a provisional measure. Legal counsel assesses the likelihood of an unfavourable outcome as low, so no provision is made.
• Financial Impact: No provisions have been made for the above cases as legal opinion remains in Metrod’s favour and the probability of negative outcomes is considered remote. However, investors should note such exposures exist and could be material depending on the outcome.

Potential Price-Sensitive Information for Shareholders

• Major RRPTs with significant value involved—especially the high volume of copper goods traded with related parties—could be subject to regulatory scrutiny or changes in trading relationships, impacting earnings.
• Pending litigation and tax assessments in India could have financial implications if outcomes are unfavourable, despite current confidence.
• Shareholder voting implications: Major shareholders and interested parties will abstain, leaving the final approval in the hands of the remaining shareholders.
• Audit and governance processes are robust, with quarterly audits and internal checks, which should reassure investors about the integrity of RRPTs.
• Renewal of mandate: Routine but essential for business continuity; failure to renew could disrupt supply chain and operations.

Directors’ Recommendation

The Board (excluding the interested director) recommends that shareholders vote in favour of the proposed renewal of the RRPT mandate, considering its necessity for ongoing operations and the positive impact on capacity utilisation and supply chain resilience.

Action Required

• Shareholders who wish to appoint a proxy must lodge the completed proxy form by 2.00 p.m., 24 May 2026 via the specified methods.
• The notice of AGM and proxy form are available on the company website.

Conclusion

The renewal of the shareholders’ mandate for RRPTs is pivotal for Metrod’s operational flexibility and efficiency. Investors should pay close attention to the outcome of the AGM, the ongoing Indian litigations, and any variance in RRPT values which may trigger Bursa announcements. These factors, alongside strong governance practices, should be carefully considered when evaluating the company’s prospects and share value.

Disclaimer: This article is a summary and interpretation of Metrod Holdings Berhad’s circular to shareholders regarding the renewal of the RRPT mandate. Investors should review the full circular and seek independent financial advice if in doubt. The article does not constitute an offer or solicitation to buy or sell any securities and is for informational purposes only.

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