Customers look at Sharp Corp. Aquos televisions displayed at an electronics store in Tokyo, Japan
© Bloomberg News

Shares in Sharp fell on Monday after it emerged that the heavily indebted Japanese group was considering a second capital raising in six months.

The electronics company, which 18 months ago warned that there was “material doubt” that it could stay in business, said that it was exploring ways to buttress its balance sheet.

Sharp is considering various possibilities to boost its capital, but has not made any concrete decision yet,” the company said.

Media reports suggested the Osaka-based company – which before Monday’s share price fall had a market capitalisation of Y508bn ($5bn) – could raise as much as Y200bn through a share offering.

Sharp declined to confirm how much it needed to raise or how the money would be raised. Shares fell 9 per cent to Y273 after opening at Y299, the biggest daily drop since June.

The group had appeared to be slowly returning to health, announcing two months ago that it expected a Y5bn net profit for the year to March 31 following two years of multimillion dollar losses. It also forecast greater sales than previously expected of Y2.9bn, an increase of Y200m.

Sharp attributed its “mild recovery” to the beneficial impact of a weaker yen as part of Abenomics, but warned that recovery in Europe and growth in emerging markets both showed signs of stalling.

The century-old company, which started out making mechanical pencils, is among the most troubled of Japan’s big consumer groups because of its reliance on television manufacturing, which has seen it lose out to cheaper South Korean and Taiwanese rivals. Its full-year net losses have totalled Y921m in the past two years.

Yasuo Nakane, analyst at Deutsche Bank, said an imminent announcement of plans for a capital raising would be surprising, given that the company has the funds from its capital raising late last year.

“Its [profit and loss statement] is much better than expected for [the year to] March 2014,” he added. “It is not as jeopardised as in the past.”

Sharp raised Y120bn through a share offering in October, with an additional Y17.5bn of capital raised through tie-ups with a trio of Japan’s biggest manufacturers.

Denso, a car parts manufacturer; Makita, a tools manufacturer, and Lixil, which makes building materials and household fittings, each took a small equity stake in Sharp in exchange for their investments.

Sharp’s preferred strategy to shore up capital has been to receive equity investments, notably with US technology group Qualcomm as well as Samsung Electronics.

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