Home ›› 27 Oct 2021 ›› Front
The capital market has shown a consistent trend of recovery from Covid-19 shock since the last year, but 19 listed companies’ shares are struggling to even hold their face value in local bourses.
Dhaka Stock Exchange data collected on October 21 shows that most of these companies are in the textile sector. Aside from nine textile companies, the list contains five non-bank financial institutions, three banks, and one company each from the chemical and engineering sectors.
These companies used to be promising ventures, but lost investor interest due to a number of reasons, including irregularities, corruption, accidents at factories and defaulted loans. Some of them have also halted production for different periods, analysis of the market data shows.
Speaking to The Business Post, stock market analyst and Associate Professor at the Department of International Business in Dhaka University Suborna Barua said, “Investors have a reasonable understanding of companies that are fundamentally not good.
“Such companies are not good at production, and cannot generate revenue. So, these are just junk shares. It does not matter how upward the market is, there is no reason for the price of these shares to go up unless someone is gambling or manipulating their prices.”
Suborna added that these companies’ share values will not go up unless their fundamental characteristics improve too.
The capital market has been showing a continuous upward trend since July last year, and the main index DSEX reached 4,001 on July 7. The index stood at an all-time high 7,367 points on 10 October this year, and it currently stands at around 7,000 points.
Nine companies from textile sector
According to the market data, textile companies Nurani Dying, Familytex BD, Generation Next Fashion, C&A Textile, Tung Hai Knitting, RN Spinning, Delta Spinners, Zahintex and Zaheen Spinning are having serious difficulties in holding their face value.
Six of these companies are in the Z category, two are in the B category and Nurani Dying is under the A category. The DSE in August this year learned that Nurani Dying’s office and factories has been shut down.
The Bangladesh Securities and Exchange Commission (BSEC) this September decided to reconstruct Nurani Dying’s board and punish auditors for concealing information about the factory’s closure.
Last year, the BSEC had fined each director (excluding individual directors) of the Generation Next Fashion for not properly utilising the funds collected from right share distribution, and for violating laws in preparing financial statements.
C&A Textile and Tung Hai Knitting are in crisis due to several issues such as irregularities, incompetent management, directors selling shares without announcement, and punishments from market regulator BSEC.
Alif group had announced acquisition of C&A Textile this October, and the regulator has approved the move. Meanwhile, RN Spinning Mills halted production back in April 2019 after its yarn factory in Cumilla’s Export Processing (EPZ) caught fire.
Five non-bank financial institutions
The scams perpetrated by PK Halder and his associates have sunk at least five listed non-bank financial institutions. Among those, People’s Leasing and Financial Service Ltd have stopped trading in the capital market.
The shares of Bangladesh Industrial Finance Company (BIFC), International Leasing and Financial Services and FAS Finance are trading under the face value of Tk 10.
Fareast Finance is currently unable to return their customers’ money due to irregularities and corruption perpetrated by its directors who were involved with PK Halder.
First Finance is facing severe difficulties due to irregularities and corruption of its former managing director Tuhin Reza, who got fired by the central bank in March this year.
Three in banking sector
The Bangladesh Bank had barred the scam-hit National Bank Ltd’s (NBL) lending activities over loan disbursement irregularities and exceeding its advanced deposit ratio (ADR). It was once one of the most reputed banks in Bangladesh with a strong capital base.
ICB Islamic Bank Ltd emerged from the ruins of Oriental Bank in 2008, after several scams. The bank’s origins can be traced back to 1987, when it was operating under the moniker Al-Baraka Bank. In 1994, the bank became a problematic institution due to consisted irregularities.
The bank’s situation has not improved, evident by a loss of Tk 18.7 crore in 2020, and Tk 42 crore in 2019.
Despite consistently booking profits and paying dividends, Standard Bank’s shares have also been trading under the face value for the majority of the last two years.
Keya Cosmetics
Keya – listed under the chemical sector – became one of the leading companies in Bangladesh back in 2000. But an acute crisis of good management and lack of proper planning caused the company to collapse gradually.
Pubali Bank organised an auction to sell of Keya Cosmetics’ property in April this year to recoup the debt, but the bank halted the move soon after.
On the issue, its CFO Humayun Kabir told The Business Post, “Pubali Bank has postponed the auction and rescheduled our loan. We are paying regular installments. The hurdles we were facing are no longer here, and our export volume is rising too.
“Overall, Keya Cosmetics’ business is now better than ever.”
Appollo Ispat Complex
The owner of Appollo Ispat Complex had died this April, and soon after, his heirs tried to sell the company to reduce the debt burden. But they are yet to find a suitable buyer, industry insiders said.
At that time, there were rumours in the market that the company has been sold successfully, and this increased Appollo Ispat’s share value to Tk 14.80. But now their shares have dropped below their face value.
The market data shows that there are at least eight other companies whose shares are being traded very close to their face value – between Tk 11 and Tk 11.90. They are Ringshine, Regent Textile, Tallu Spinning, First Security Islami Bank, Premier Leasing, Union Capital, Olympic Accessories and Yeakin Polymer Ltd.
