22 companies downgraded to ‘Z’ category

At least 22 listed companies of the Dhaka Stock Exchange (DSE) have been downgraded from the bourse’s categories ‘A’ and ‘B’ to the category ‘Z’ due to their non-compliance and low performance.

Of the companies, three were transferred to the junk category from the A category and the remaining 19 from the B category.

DSE confirmed and disclosed the development on its website on Sunday.

The country’s prime bourse finalised the list of 22 companies two days after the Bangladesh Securities and Exchange Commission (BSEC) issued a directive regarding category-wise placement of companies.

Delta Spinners, Keya Cosmetics and Uttara Finance have been shifted to the junk category for not holding Annual General Meetings (AGMs) within the given time. These were in the B category.

Four companies have been transferred to the Z category for not remaining in operations for more than six months and the remaining 15 companies have lost their status for negative retained earnings overshooting the paid-up capital.

These companies are Alltex Industries, Aramit Cement, Aziz Pipes, Fas Finance & Investment, Intech Limited, International Leasing And Financial Services, National Tea Company, Premier Leasing & Finance, Renwick Jajneswar & Co (Bd), Ring Shine Textiles, Safko Spinning Mills, Standard Ceramics, The Dacca Dyeing & Manufacturing Company, Union Capital, Zahintex Industries, Khula Printing, GBB Power and Regent Textile.

Currently, there are 49 companies, with 22 in the Z category, on the Dhaka bourse.

If a listed company fails to hold an AGM for three straight years, fails to pay dividends for a single year, or pays less than a 5 per cent dividend, it will then, as per securities laws, be pushed down to the DSE’s Z category.

In a recent letter to the non-compliant companies, BSEC said their failure to disburse dividends among shareholders after dividend announcements within the stipulated timeframe were equal to market manipulation.

Last Thursday, BSEC issued the order to the DSE to downgrade the 22 companies to the Z category.

As per the new order, companies that have failed to hold the AGM in time and to declare dividends for two consecutive years, have not been in operation for more than six months, or have accumulated losses or negative retained earnings exceeding the paid-up capital are eligible to be classified as Z category companies, also known as junk stocks.

Investors cannot take margin loans to buy shares of these companies, and their trading requires three days to be settled, instead of the usual two days for regular stocks.

A top BSEC official said this clause would be applicable in cases of action against any issue of non-compliance.