The securities regulator – Bangladesh Securities and Exchange Commission (BSEC) – has conditionally approved a proposal of Wise Star Textile Mills and five other Singapore-based private firms to acquire a 38 per cent share of Ring Shine Textiles Limited (RSTL).
The stock regulator has given its consent to the proposal of Wise Star Textile Mills Ltd and others to acquire 19,00,33,881 shares, or 38.3 per cent stake of Ring Shine Textile Mills held by its sponsors and directors through share transfer or transmission upon fulfilling the regulator’s eight conditions, as per a Dhaka Stock Exchange (DSE) filing on Tuesday.
As per the BSEC consent, the proposed transfer of these shares will be held outside the trading system of the stock exchanges in compliance with securities laws. To execute the proposed transfer or transmission, these shares will be unblocked and re-blocked, and the status of these shares will be changed from existing sponsor shares to public shares.
Since the proposed companies will take over the entire existing liabilities, including bank liabilities and assets of Ring Shine Textile Mills, along with the huge negative net worth resulting from fictitious assets in the balance sheet, the proposed share transfer may be held at a negotiated price as per the share purchase agreement (SPA) among the buyers and sellers.
The Wise Star Textile Mills will ensure to regularise the whole banking liabilities of Ring Shine Textiles, according to the BSEC.
After the execution of this transfer, the reconstituted board will initiate the process of capital reduction or cancellation of unsubscribed shares, subject to the BSEC approval.
No enforcement or legal action will be initiated against the new proposed companies and their directors with regard to irregularities, non-compliance, or offenses committed by previous sponsor shareholders and directors.
After the execution of this transfer, the BSEC may release the IPO fund for the smooth operation of the company and ensure the payment of BEPAZ and other dues.
The existing board of Ring Shine Textile will be reconstituted, incorporating new independent directors and the proposed shareholder directors from buyers, and any relevant rules and regulations as suggested by BSEC will be complied with.
Wise Star, a private firm runs by the managing director of listed Queen South Textile.
Founded in 1997, Ring Shine Textiles Ltd raised Tk 150 crore from the market through an initial public offering (IPO) in 2019 to purchase machinery and repay bank loans.
The company had declared a stock dividend of 15 per cent for the shareholders on the audited financial statements as on June 30, 2019, disbursed bonus shares to the respective shareholders, and raised its paid-up capital to Tk 500 crore.
In the second year of its listing, the RSTL’s Savar plant had announced a month-long closure in September 2020, citing a decrease in foreign buyers and a shortage in the import of raw materials due to the Covid-19 crisis.
The closing period was later extended three times. On January 27, 2021, the BSEC dissolved the company’s board of directors and tasked a new board for taking necessary measures to restart the company.
In June 2021, the company declared that it would resume production after almost nine months of closure. The company said it would resume production on June 13 at 25 per cent capacity.
RSTL did not pay any dividends for FY21 and FY22, and the company’s loss per share stood at Tk 1.54 in the last fiscal year.
The company’s financial state is still vulnerable, with the publicly traded company reporting a net loss of Tk 74.5 crore in the first nine months of the fiscal year of 2022-23, much higher than the loss of Tk 47 crore in the same period a year ago.
The textile manufacturer’s financial performance got worsened, as it posted a net loss per share of Tk 1.49 for the July-March of FY23 against the loss per share of Tk 0.94 for the corresponding period a year earlier.
In the third quarter (January-March) of FY23, the listed firm posted a loss per share of Tk 0.73, a decline from loss Tk 0.59 for the same period in FY22.
Earlier on April 18 this year, The Business Post carried a news report that the top management of RSTL had laundered nearly Tk 2,000 crore in the last 22 years utilising a myriad of financial anomalies, with the help of its now former managing director Sung Wey Min, an Indonesian citizen.
The staggering tale of gross irregularities came to light in a report, compiled by an inquiry committee and special auditor under the Bangladesh Securities and Exchange Commission (BSEC).
Documents had shown that between 1998 and 2020, RSTL’s management laundered $124 million or nearly Tk 1,242 crore through telegraphic transfers (TT), moving funds from corporate to overseas accounts of the then managing director, sponsor directors, and parties unknown.
