Shuttered companies still trading on DSE

Five companies listed on the Dhaka Stock Exchange have been out of production for a long time but their shares are still allowed to trade on the premier bourse, setting general investors up for losses.

Beach Hatchery closed down on April 25, 2016, while Modern Dyeing had shuttered in 2010, according to data from the DSE.

United Airways has not run any flights since 2015 and the factory of C&A Textile has been closed from May 1, 2017.

Production at Rahima Food Corporation has remained closed for a long time, but the exact date could not be known immediately.

Most of these companies are incurring losses, prompting their sponsor shareholders to sell off large chunks of their stakes, leaving general investors to foot the losses.

But on Thursday, shares of Beach Hatchery rose 7.48 percent to Tk 15.80 and United Airways 2.17 percent to Tk 4.70.

The share prices of C&A Textile and Rahima Food Corporation remained unchanged at Tk 7.60 and Tk 135 respectively, while Modern Dyeing declined 3.74 percent to Tk 229.

“The regulator can suspend their share trading and look into the reason behind their folding down,” said Mohammed Rahmat Pasha, chief executive officer of UCB Capital Management.

The regulator can punish those found responsible in the investigation and compel directors to buy back shares, he said, citing India as an example.

“India and developed countries follow a system that helps mitigates the losses of general shareholders,” he added.

If a company's operation remains suspended for a long time investors can go to court seeking its liquidation, said Saifur Rahman, spokesman of the Bangladesh Securities and Exchange Commission. The commission always tries to assure that the quarterly or annual reports of the companies are published regularly and compel sponsors to maintain the minimum shareholding requirement.

“There are some directives about this type of companies, but we have not taken any steps yet,” said KAM Majedur Rahman, managing director of the DSE.

He also said the DSE will comply with the directives in future.

DSE data showed the flight operations of United Airways have been suspended since 2015. Since then it has been making losses.

Earnings per share of United Airways were Tk 0.34 in the negative in July-September of 2017 against Tk 0.44 in the negative a year earlier. As the company was incurring serious losses, the sponsor-shareholders sold their shares.

The sponsors had only 4.16 percent shareholding as of February 28, while the general public's shareholding stands at 70.47 percent.  According to the BSEC directive, sponsor-shareholders must own at least 30 percent shares.

“If sponsors of any company don't own the minimum shareholding we will take necessary steps,” said Rahman of the BSEC.

The telephone number of United Airways listed on the DSE website as well as on the airline's website was found to be inactive. The airline did not reply to e-mail request for comment from The Daily Star either.

C&A Textile was listed in 2015 and it put up the shutters of its factory on May 1, 2017, according to the DSE. Since then, the company has started to bleed money.

Its EPS was Tk 0.10 in the negative for January-March 2017, which was Tk 0.27 in the negative a year earlier. The company has not declared any EPS since then.

As it plunged into losses, the company's sponsor-shareholders began selling their shares.

The sponsors' shareholding, which was 30.29 percent on June 30, 2016, came down to 22.14 percent on July 31, 2017.

The telephone number of C&A Textiles available on the DSE website as well as on the company's website was found to be inactive. The company could not be reached through email either.

Beach Hatchery plunged into the red after its production shut down.

Its EPS stood at Tk 0.20 in the negative for the July-December quarter of 2017, which was Tk 0.22 in the negative a year earlier.

Beach Hatchery has informed through the DSE that it received a notice from the Deputy Commissioner of Cox's Bazar for the acquisition of its land in August 2015.

The company applied to the respective authorities against the decision of the acquisition as it would severely hamper the overall production of the hatchery. But the authorities did not take the plea into account.

The reservoir tank, water pump house, overhead tank and around 68,500 square feet area were demolished when the marine driveway was constructed.

The company told the DSE that it is trying to continue production, but it was compelled to shut down operation as hatchery production depends on saline water.

An official of Beach Hatchery, requesting anonymity, said the company is trying to resume production but it needs subsidy from the government to do so.

The company is yet to receive any assurance from the government about the subsidy yet.

Md Shariful Islam, managing director of Beach Hatchery, did not answer calls from the correspondent on his mobile or respond to text messages.

Modern Dyeing & Screen Printing factory announced its closure on January 31, 2010 due to a lack of effluent treatment plant, labour problems, low gas pressure and low efficiency of existing old machines.                       

It held an extraordinary general meeting on August 3, 2010 in Dhaka that was attended by all of its shareholders. It was decided the factory space will be renovated immediately and subsequently be rented out as warehouses.

In an email, the company said: “We are paying the dividend from the incomes from our premise rentals.”

It, however, said nothing about its factory operation.

Rahima Food Corporation is trying to revive its production by rearranging product offerings, according to news published on the DSE website.

Senior officials of the company could not be reached. Rahima Food Corporation did not reply to e-mails.