Five companies listed in the Dhaka Stock Exchange (DSE) have been downgraded to Z category with effect from Sunday as they failed to declare dividends for more than two years.
Among the firms, Ratanpur Steel Re-rolling Mills (RSRM), Shurwid Industries, Nurani Dyeing & Sweater, and Northern Jute Manufacturing Company have been relegated from A category while Appollo Ispat Complex from B category.
In a regulatory directive issued on Sunday, stock brokers and merchant bankers were requested not to give loans to investors to purchase these securities.
Nurani Dyeing had already been languishing at the floor price of Tk 7 on the Dhaka Stock Exchange since September last year. The regulatory move dragged four other stocks down 5.75-9.90 per cent on Sunday.
Most of the companies have seen the joint stakes of sponsor-directors fall below the required 30 per cent. Their factories have been closed for a long time either for working capital shortage or IPO fund embezzlement or for default loans.
RSRM enduring working capital shortage
Ratanpur Steel Re-rolling Mills, which was listed in the stock market in 2014, paid 10 per cent cash dividend to shareholders in 2020. That was the last time it disbursed any dividend.
RSRM raised Tk 1 billion through an initial public offering (IPO) for working capital and debt repayment.
According to the company's auditor, the company had not been able to clear its dues. Its short-term loan amounts to Tk 870 million while long-term loans Tk 910 million.
The company's production has remained suspended for more than two years due to working capital shortage. It incurred a loss of Tk 379 million in FY21.
"No sales and no recovery of receivables. So cash inflow has almost stopped," said company secretary Mohammad Moin Uddin.
Due to the fund shortage, the company could not get raw materials, he added.
RSRM's stock tumbled 9.78 per cent to Tk 20.30 on Sunday after soaring 38 per cent in the last three months.
Shurwid Industries embroiled in rivalry among current and former directors
The producer of medicine packaging for pharmaceutical industries and PP film of food packaging has failed to declare dividend for three years.
It also failed to arrange AGM for more than three years due to lawsuits tied to IPO fund embezzlement by the company's former chairman and managing director.
The company raised Tk 140 million through an IPO in 2014.
Its factory was shut in March 2020.
The current management took over the company in 2018 but failed to run it smoothly due to rivalry among incumbent and former directors.
The company's stock, which soared 38 per cent in the past three months, tumbled 9.90 per cent to Tk 17.30 on Sunday.
Northern Jute Manufacturing's bank accounts frozen
It had announced that the factory would stay closed indefinitely due to a Bangladesh Bank order to freeze all of its bank accounts rendering it incapable of paying workers' wages.
Chairman of Northern Jute Uzzal Kumar Nandi was also the head of scam-hit People's Leasing and Financial Services (PLFS).
Despite the facts, the stock jumped 45 per cent in the past three months before sliding 8.72 per cent to Tk 256.50 on Sunday.
On May 29 this year, the DSE sent a letter asking the management about the unusual rally of the stock and about the sheer volume of share transactions. But the company has not provided any response till date.
The company also disclosed no financial data since FY20.
False claims in Nurani Dyeing's IPO prospectus
Only three years after 2017 listing, Nurani Dyeing & Sweater fell into a financial crisis as owners siphoned off the IPO fund and fled the country.
The company had made false financial claims in its IPO prospectus.
In August 2021, the securities regulator also punished the company's auditor for providing false information.
The troubled company paid 10 per cent stock dividend in 2020 for the last time.
Appollo Ispat Complex unable to repay loans
Appollo Ispat Complex, which once produced popular Rani Marka Dheutin (iron sheet), is now unable to pay back creditors.
It had short-term loans of Tk 2.35 billion and long-term loans of Tk 700 million as of FY18, according to the DSE data.
The company has not updated financial data since FY18.
Stock investors are still puzzled about how the once well-performing, popular company turned into a loss-making venture.
Md Sirajul Haque, a sponsor of the company, embezzled Tk 2.50 billion and fled to Canada after selling the company's land without informing the board.
The stock of Appollo Ispat slipped 5.75 per cent on the DSE to Tk 8.20 on Sunday.
The five companies have met one or more features cited in a 2020 order by the securities regulator to be transferred to Z category.
Any listed firm is transferred to Z category if the company fails to declare cash dividend for two years in a row from the date of declaration of the last dividend, as per the order.
A stock is also shifted to Z category if the company has failed to hold annual general meetings (AGMs) for two consecutive years, and production has remained suspended for at least six consecutive months.
The regulator takes the same move when a stock has shown net operating loss or negative cash flow from operations for two consecutive years or if a company's negative retained earnings exceeded its paid-up capital.
According to the DSE settlement and transaction regulation, a company has to pay at least 10 per cent dividend, annualised, to shareholders to have its shares traded under A category on the bourses.
If the company declares less than 10 per cent dividend, it will be placed under the B category.
babulfexpress@gmail.com
© 2025 - All Rights with The Financial Express
