Hanwha Investment & Securities to Reduce Dunamu Concentration Risk and Scale Up, Raising KRW 900 Billion in Capital [fn Market Watch]

[Financial News] Hanwha Investment & Securities is moving to become a securities firm with equity capital in the KRW 3 trillion range by raising up to KRW 900 billion. The move aims to reduce the heightened single-company concentration risk stemming from its investment in Dunamu and is seen as both a way to strengthen its capital buffer and a step toward laying the groundwork for approval as a comprehensive financial investment business operator.
Yeo Yun-gi, a senior researcher at Korea Investors Service (KIS), said in a report on the 1st, “Hanwha Investment & Securities’ capital raising is expected to have a positive effect in reducing the burden of its single-company exposure, which increased after the acquisition of a stake in Dunamu.” He added, “This is positive for the company’s creditworthiness.”
Hanwha Investment & Securities decided on September 30 to conduct a KRW 500 billion third-party allotment paid-in capital increase. Hanwha Asset Management will acquire 50 million common shares for KRW 250 billion, while Hanwha Life will acquire 50 million convertible preferred shares for KRW 250 billion. Payment is due on the 8th.
The company is also pursuing the issuance of up to KRW 400 billion in domestic privately placed, bond-type hybrid securities. The actual issuance, its size, interest rate and timing will be determined based on market conditions and funding needs during the year. If the company fills the entire limit as planned, the total capital raising will reach up to KRW 900 billion.
As a result, Hanwha Investment & Securities’ equity capital is expected to increase from KRW 2.2674 trillion at the end of June to approximately KRW 2.8 trillion after the capital increase. If it issues the full limit of hybrid securities, its equity capital could expand to approximately KRW 3.2 trillion.
With a thicker equity capital buffer, the company will have greater capacity to absorb the impact of fluctuations in Dunamu’s stake value on its capital. However, increasing capital does not eliminate the risks associated with Dunamu itself.
Yeo noted, “Capital volatility stemming from fluctuations in the value of the Dunamu stake and single-company concentration risk still exist.”
The additional capital will also serve as fuel for business expansion. Hanwha Investment & Securities plans to build the foundation for approval as a comprehensive financial investment business operator and expand its operating base in key businesses. Since the size of equity capital directly affects a securities firm’s business scope and operating competitiveness, entering the KRW 3 trillion range could provide an opportunity to raise the company’s business scale to the next level.
Its performance is also recovering. Hanwha Investment & Securities reported an operating loss of KRW 7.4 billion in 2024, but recorded an operating profit of KRW 150.9 billion last year. In the first half of this year, it posted an operating profit of KRW 100.5 billion and net income of KRW 55.7 billion.
The key issue is whether assets and leverage grow faster than capital. On a standalone basis, total assets increased by approximately KRW 4.1 trillion, from KRW 16.4528 trillion at the end of last year to KRW 20.5847 trillion at the end of June this year. Over the same period, adjusted leverage rose from 8.2 times to 9.4 times, while the adjusted net operating capital ratio fell from 291.4% to 238.5%.
Yeo assessed, “If risk exposure and leverage increase as the company expands its operations after the capital raising, the improvement in capital adequacy could be partially offset.” He continued, “We plan to continuously monitor the actual issuance size and terms of the hybrid securities, the increase in risk assets and the level of capital adequacy management following the capital raising, and the contribution of new businesses to earnings.”
[email protected] Kim Hyun-jung Reporter