The readymade garment (RMG) and textile sectors of Bangladesh exported goods worth over $100 billion in the last four years, and new investments are coming to these industries every year.
These industries however have shown a remarkable disinterest in getting listed with the capital market. Until 2019, the number of RMG and textile companies in the capital market stood at only 30 and 28 respectively. The number of new companies getting listed is zero since 2019.
There are 3,731 registered member companies under the Bangladesh Garment Manufacturers and Exporters Association’s (BGMEA). Although these companies make a sizable contribution to the country’s export revenue, it has almost no impact on the stock market.
Dhaka Stock Exchange (DSE) data on listed RMG companies show that in the last ten years, 30 companies listed and raised Tk 2,049 crore from the market. Among those, six got listed in the years 2014 and 2015.
During this period, Tk 480.87 crore was withdrawn from the capital market in 2015. And in 2014, Tk 381.17 crore was withdrawn. The least amount withdrawn was in 2016, when only 2 companies withdrew Tk 57 crore.
According to BGMEA data, the country exported garment products worth $46.99 billion from Bangladesh in FY23. In FY22, export earnings stood at $42.61 billion. And for FY21, export income stood at $31.36 billion.
The sector accounts for 83 per cent of total export earnings in the country, BGMEA data show.
Commenting on the RMG and textile industry companies’ disinterest in getting listed, Israq Textile Mills Ltd Managing Director Fazlul Hoque said, “The capital market account has to be maintained as per government regulations.
“All information about the business has to be reported according to the regulatory body Bangladesh Securities And Exchange Commission (BSEC) guidelines. Most of the textile companies do not have that capacity.”
Hoque, also the Bangladesh Textile Mills Association (BTMA) vice president, said, “The way the capital market is manipulated, good businessmen do not want to get involved in these complications.
“But I think all the companies doing good business in the country should get listed in the capital market because they should leave a part of their business to the people.”
Bangladesh Merchant Bankers Association (BMBA) General Secretary and BMSL Investment Managing Director Riyad Matin said, “There are many types of problems in the financial reporting of companies in the textile sector.
“LC information for these companies, sales information, and financial reports are not available.”
He explained further, “The regulatory body of a bank or financial institution is the Bangladesh Bank, so there is no problem with financial reporting of such an institution. If there is a company in the insurance sector, there is Insurance Development and Regulatory Authority (IDRA), and a lot of information is available from there.
“But as there is no designated agency for companies in the textile sector, their financial reports cannot be verified. Many times, companies in the textile sector approach us for listing. When numerous problems are found in their financial reports, we ask to fix them. But they cannot do so.”
Matin then pointed out, “An example is Ring Shine. To bring the company into the capital market, there must be no issues in their financial reports. But the company got listed anyway. The majority of organizations in this sector pose similar situations.”
Among the companies that got listed on the capital market in the last ten years, 17 are currently trading in the "A" category. There are 10 transactions in the "B" category. And there are 4 transactions in the "bad" or "Z" category.
Shasha Denims Ltd raised Tk 175 crore in 2015. This company is currently trading in the "A" category. Since its listing, the company paid a maximum cash dividend of 25 per cent to its shareholders in 2016 and 2017. And the lowest cash dividend paid is 5 per cent in 2020.
In 2014, Matin Spinning Mills PLC raised Tk 126.17 crore from the capital market. Since its listing, the company has been paying an average cash dividend of 15 per cent every year, and paid a maximum 50 per cent cash dividend back in 2022.
Zaheen Spinning Ltd has raised the least amount – Tk 12 crore – from the capital market in the last ten years. This "B" category company distributed cash dividends at an average of 10 per cent every year before 2022. It distributed a 5 per cent cash dividend in 2022.
Among the companies listed between 2010 and 2022 are Ring Shine Textiles, C & A Textiles, Tung Hai Knitting & Dyeing, and Familytex (BD), which are currently trading in the "Z" category.
Speaking to The Business Post, a senior official of a merchant bank in charge of listing new companies in the capital market said, “It is true that there are many complications associated with bringing in new companies.
“However, the problem is different for companies in the textile sector. As the companies in the textile sector of the country are export-oriented, they enjoy various benefits from the government, including tax and VAT concessions. As a result, they do not need to take advantage of the capital market.”
He added, “Besides, entrepreneurial directors of companies listed in the capital market have to hold 30 per cent of their shares compulsorily. Even though they get a board meeting fee from the company, they have to take the same dividend as ordinary shareholders.
“But they have to deal with all the complications of the company. For these reasons, companies, especially in the textile sector, do not want to get listed in the capital market.”
Besides, every company that got listed in the last ten years may not do well. Therefore, it is not logical to bring forward bad companies as examples and not to list them afresh, the official pointed out.
Rezaul Karim, executive director and spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said, “The commission does not have any guidelines on which sector companies will be listed or not.
“Rather, whenever a company is submitted to the commission for listing in the capital market, it is quickly scrutinised.”
He continued, “The first condition for the company to be listed is transparency in financial reports. No matter how big the organisation is, if there is a problem with financial reports, it will not be approved.
“If the issue managers can come up with good textile companies, approval will be given.”
Commenting on the matter, Dhaka University Professor and capital market analyst Abu Ahmed said, “Although there have been no new textile sector companies in the capital market for four years, this does not mean that there are no good textile or RMG companies in the country.
“Billions of dollars of export earnings would not have been generated from this sector without good companies.”
Prof Ahmed said, “Issue managers feel comfortable coming up with easy-to-use companies. If there is a problem in the financial reporting of the textile sector, they are responsible for correcting it properly.
“If a company in the textile sector has not gotten listed after a long time, the regulatory body needs to emphasise on this issue. Aside from the RMG and textile industry, companies in other sectors should also be looked at.”
