Doosan Group, the nation’s 12th-largest conglomerate by assets, said Monday it would inject a paid-in capital increase to its construction arm Doosan Engineering & Construction, which is facing a liquidity crisis.

Industry watchers said the group’s move will help Doosan E&C secure up to 1 trillion won ($918 million) by issuing new shares to major shareholders under the Doosan Group umbrella.

The group’s Doosan Heavy Industries holds 72.74 percent of Doosan E&C’s shares, while Doosan E&C honorary chairman Park Yong-kon and other group owner family members hold about 6 percent of the shares.

Doosan E&C, whose annual sales amount to 2.8 trillion won, faces its liquidity crunch as its debt-to-equity ratio surged to 280 percent at the end of last year. The company’s cash assets dried up because of difficulties in sales of its newly built residential and commercial building in Ilsan, Gyeonggi Province. The builder attracted about 2 trillion won to finance the construction project.

Doosan E&C is also attempting to auction off its office building in Seoul’s Gangnam district worth 220 billion won to secure capital.

Company officials said the company will pay back debts after recapitalization and financial restabilization.

Market watchers agreed that the parent company’s support will help Doosan E&C but they said the measure could deal a blow to the overall group’s financial health.

Shares of Doosan Heavy Industries, core business arm of Doosan Group, fell about 8 percent on Monday for the second consecutive day, affected by its participation in the paid-in capital increase for Doosan E&C.

By Seo Jee-yeon  (jyseo@heraldcorp.com)