South Korean steel giant POSCO Group has decided to invest nearly 1 trillion won ($706 million) in its secondary battery materials affiliates, including POSCO Future M Co., to support capacity expansion and stabilize operations.

POSCO Holdings held a board meeting on Tuesday and approved a total investment of 922.6 billion won through a capital increase in three subsidiaries — POSCO Future M, POSCO-Pilbara Lithium Solution, and POSCO GS Eco-Materials.

POSCO Future M, a leading producer of cathode and anode materials, also announced a rights issue worth 1.1 trillion won.

POSCO Holdings will acquire all 525.6 billion won worth of new shares allocated to it in line with its current 59.7 percent stake, though its ownership will fall to 58.1 percent post-issuance. The issue price is set at 95,800 won per share.

The funds will be used to expand battery material production facilities at home and abroad, including a cathode joint venture plant in Canada.

POSCO Holdings will also inject 328 billion won into POSCO-Pilbara Lithium Solution, a joint venture with Pilbara Minerals Limited, and 69 billion won into POSCO GS Eco-Materials, a battery recycling business co-owned with GS Energy Co.

POSCO Pilbara imports lithium ore from Australia for domestic processing, while POSCO GS Eco-Materials serves as the holding firm for POSCO HY Clean Metal.

Shares of POSCO Future M closed 2.52 percent lower at 120,100 won on Tuesday before slipping further in after-hours trading to 113,800 won, down 7.63 percent.

Investors expressed mixed views on the capital raise, with concerns over dilution weighing on sentiment.

However, analysts noted that only around 5 percent of newly issued shares would enter the market, limiting the overall impact.

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