Overhaul of the board of directors of closed and underperforming companies is bearing fruit

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The wheels of both companies have started to turn again after remaining closed for many years while another company is set to resume operations – thanks to the restructuring of the boards of the Bangladesh Securities and Exchange Commission (BSEC) .

Last year, the stock market regulator began revamping the boards of a number of listed companies that have either been closed for a long time or failed to pay dividends to shareholders in the previous two years. .

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The objective has been to reverse the course of companies, protect the interests of investors and restore confidence in the market.

Initially, the regulator restructured the board of C&A Textiles, Ring Shine Textiles, United Airways, Familytex (BD), Emerald Oil, Fareast Finance, Fareast Islami Life Insurance, FAS Finance, BD Wielding and Al-haj Textiles.

Among them, Ring Shine Textiles and Emerald Oil have already resumed operations, while C&A Textiles is looking to make a comeback.

Some companies need funds to recover and try to attract investment from other companies, at home and abroad, or by issuing bonds.

EMERALD OIL

Emerald Oil, which sells edible rice bran oil, went public in 2014 and was profitable until 2016.

In 2017, the company started making losses and the operation stopped due to a lack of working capital. It was around this time that a loan fraud by its founder came to light.

BSEC restructured its board of directors in March last year. The new council tried to take over the operation of the factory.

Minori Bangladesh Ltd, a Japanese company, bought 30% of the sponsors’ shares and another 8% on the capital market.

Emerald Oil said it resumed commercial production on January 9 this year after successful trial production.

SHINY RING

Ring Shine Textiles raised Tk 150 crore in the market in 2019 to purchase machinery and repay bank loans.

He sold shares in the pre-IPO (initial public offering) period for free through a private offering, a clear act of infringement, according to a special BSEC audit.

On August 27, 2020, the management decided to close the factory for a month due to the coronavirus-induced shortage of imported raw materials.

However, the company was unable to resume operations. The BSEC restructured the board in January 2021.

It resumed production on June 13 last year at 25% of production capacity and plans to increase it, Ring Shine Textile said recently.

C&A TEXTILES

C&A Textile was downgraded to junk stock within three years of its IPO in 2015 because its business activity was suspended and it did not pay any dividends.

In June 2017, the textile manufacturer informed investors that it needed to upgrade some of its equipment and make structural changes to the factory in accordance with recommendations from the Accord and the Alliance, two buyer platforms. who were working at the time to improve workplace safety in Bangladesh’s garment industry.

Production will resume soon after the sanitation, he said at the time.

On May 1, the company’s business operations were temporarily shut down.

But till 2021, the business operation had not started and there was no update from the company.

This led the BSEC to reconstitute the board in March 2021. After the restructuring, the new board of C&A Textiles confirmed the regularization of gas connections and other utilities after full payment of all dues.

Alif Group is to take over the business and won regulator approval last week to issue bonds to raise Tk 300 crore.

With the proceeds of the bond, Alif Industries will purchase the shares of C&A Textiles, pay off debts, purchase machinery and use the funds as working capital.

C&A Textiles shares rose 433% after board restructuring.

However, some companies, burdened by huge debts and corruption, still show no signs of getting back to normal.

UNI AIRWAYS

United Airways started commercial operations in 2007 and raised Tk 100 crore through an IPO in 2010. It also issued rights shares in 2011 to raise funds of Tk 315 crore.

The airline’s operations were suspended in 2016.

In February last year, the BSEC appointed several independent directors, including aviation expert and Bangladesh Monitor editor Kazi Wahidul Alam as chairman.

Yesterday Alam said the council had carried out the audit of the last four years which had not been done and carried out a technical assessment of its 10 planes.

Based on the assessment, the board of directors interviewed foreign investors interested in investing in the company.

“However, we do not have access to the company premises. So the BSEC is trying to get approval from the Ministry of Civil Aviation,” Alam said.

“The new board is trying to hold the annual general meeting which has not been held for the past four years.”

FAS FINANCES

Listed in 2008, FAS Finance & Investments made profits until 2018. But it was soon in the red for massive corruption after Prashanta Kumar Halder, also known as PK Halder, and his associates defrauded 1,300 crores of Tk on behalf of several existing companies. on paper only, according to an investigation by the Anti-Corruption Commission.

In order to save the company, the BSEC recast the board of directors in May 2021. Mohammed Nurul Amin, former managing director of NCC Bank and Meghna Bank, was appointed chairman.

Speaking to the Daily Star yesterday, Amin said the new board had improved governance, cut excess costs and streamlined the workforce.

“We are now working for the revival of the NBFI.”

The company needs Tk 300 crore to Tk 400 crore in phases to make its return, meet the mandatory cash reserve ratio and statutory liquidity ratio, and pay taxes and VAT.

When asked how the funds would be raised, Amin said it could be through issuance of bonds, loans, shares or with government support.

“We will start fundraising work after the end of the current fiscal year. If we get it, it will break even in three to four years.”

EXTREME FINANCING

BSEC overhauled the board of Fareast Finance & Investments as it suffered losses and has not announced dividends since 2016.

Listed in 2013, the Non-Banking Financial Institution (NBFI) has accumulated a loss of Tk 117 crore. He needs funds to turn around.

FAMILYTEX

Listed in 2013, Familytex BD has not paid any dividends since 2019 due to losses. As a result, the company was downgraded to the junk category.

In March 2021, the BSEC recast its board of directors. The company hasn’t disclosed anything yet.

AL-HAJ TEXTILES

Listed in 1983, its production was halted on June 25, 2019 and its shares are now traded in the “Z” category, which includes discreet and non-performing companies.

In January last year, the regulator appointed three administrators to improve the company’s situation.

Its earnings per share was Tk 0.20 in the January to March 2021 period, compared to Tk 0.18 in the same period a year ago.

BD WIELDING

Listed in 1999, the company did not pay dividends after 2019 due to losses. The BSEC revamped its board of directors last year.

SAFKO SPINNING

In September last year, the BSEC reconstituted the board as it had suffered losses since 2019.

In 2019-20, spinning mills suffered a loss of Tk 17.05 crore compared to Tk 1.45 crore in the previous fiscal year.

INVESTORS ARE OPTIMISTIC

The resumption of activities of a number of companies rejoiced investors.

“It was a big step by BSEC because it will bring qualitative changes to the market,” said Zakir Hossain, an equity investor who invested in C&A Textiles.

Now he hopes to recover at least some of the funds blocked for more than three years.

“The company’s share price has already started to climb and I will be delighted when it becomes operational,” Hossain said.

WHAT THE EXPERTS SAY

Faruq Ahmad Siddiqi, former chairman of the BSEC, applauded the BSEC’s measures, saying some investors would benefit if even a single company could be revived.

The BSEC delisted companies that were found to have no potential.

Shareholders can go to court to seek the liquidation of underperforming companies, and they can recoup some investments through the process, Siddiqi said.

“If a company suffers losses for any bad intention of the sponsors, the BSEC should investigate and punish them.”


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