Two government sugar manufacturers' liabilities surpassed the value of their assets while the stocks on the Dhaka Stock Exchange have become tools of gamble.
One of them, Shyampur Sugar Mills' net asset value per share dipped to Tk 1167.57 in the negative while it has traded at Tk 103.8 in the last trading session on Tuesday. The stock peaked at Tk 122.28 on July 16 from Tk 63.10 on March 1 this year.
Similarly, the other state-run company, Zeal Bangla Sugar Mills' asset value plunged to Tk 905.70 in the negative per share but its market value soared to Tk 150.40 per share on July 3 before climbing back down on the DSE to Tk 122.4 a share on Tuesday.
The stocks have been swinging up and down on the exchange at a time when most other stocks have remained confined to the floor. Some investors take the volatility as an opportunity of capital gains while others just lose money to the profit makers.
But what is there to hope for for general investors, who account for a 46.50 per cent stake in Shyampur Sugar Mills and 36.11 per cent in Zeal Bangla Sugar Mills when both the companies have been making losses for at least the last five years?
Shyampur Sugar Mills shut down in December 2020 for a lack of capital, while Zeal Bangla has continued to count losses in keeping the operation on. Clearly, they are not going to give back anything for the money injected by retail investors in the stocks.
Under the situation, the companies' existence on the exchanges' main boards has become questionable.
Earlier, both the stock exchanges shifted many non-performing companies to the OTC (over-the-counter) market.
Some market operators say the companies' transfer to the OTC market might trigger liquidity shortage in the market. However, fictitious valuation of the stocks brings no good to anybody.
The non-performing sugar mills have huge swaths of land, but the assets mean nothing to stock investors if they do not get any return.
The securities regulator has restructured the boards of many non-performing companies, but is yet to reconstitute the boards of the listed sugar mills.
Dr. Shaikh Shamsuddin Ahmed, a commissioner of the Bangladesh Securities and Exchange Commission, suggested that privatisation could be a solution.
"We have talked about privatisation with the government high ups and received a positive response."
Privatisation is a way to hand over the ownership of a government-owned business, operation, or property to a private entity. It can also happen when a company stops being publicly traded and becomes privately held.
Dr. Mohammed Helal Uddin, a professor of economics of Dhaka University, also spoke in favour of privatisation.
He said a company might incur a short-term loss due to any abrupt situation and in that case it did not have to shut down its operation.
"But if a company continues making losses year after year, there is no logic in running that entity."
Giving reference to state-run jute mills, Mr. Helal said a losing business could be turned into a profitable one by transferring ownerships to private entrepreneurs. Those, who are benefiting from the current situation, would resist privatisation, he added.
The managing director of Prime Bank Securities, Md. Moniruzzaman provides another solution; liquidation of the non-performing sugar mills.
He said the companies with small paid-up capitals created a scope of price manipulations in the market.
"Such companies having no prospects should be liquidated so investors get back their investments from sales of the (companies') lands or assets."
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