Stock exchanges will ensure some compensation to investors of the sick companies and debentures
The securities regulator has initiated a process to clean bourses by delisting companies and securities unable to offer minimum hope to investors.
In line with the plan, the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday decided to delist four sick companies of Doel Group from both over-the-counter (OTC) markets of the country's bourses.
The OTC companies are: Bangladesh Chemical Industries, Bangladesh Dyeing and Finishing, Bangladesh Luggage Industries, and Bangladesh Zipper Industries.
Two debentures owned by the same group, which were listed in the mid-1990s, will also be delisted from the Dhaka Stock Exchange (DSE).
The luggage and zipper companies were the issuers of almost-forgotten debt securities.
Meanwhile, the stock market regulator, for the first time, is going to ensure that public investors get an amount against their investments in stocks or debentures.
The Dhaka and Chittagong stock exchanges will jointly handle an escrow account through which they will accumulate and distribute the remaining assets among investors.
When contacted, Ashok Kejriwal, managing director of Doel Group of Industries, told The Business Standard, "We will cooperate with the regulator and stock exchanges. The companies are unable to operate their businesses."
After its 742nd commission meeting, BSEC in a press statement said that investors' compensation might be based on the face value of the securities, their issue price, or a negotiated price.
Before initiating the delisting process, BSEC had also decided to halt transactions of the securities concerned at both the country's bourses.
The poorly performing companies
Beginning its venture in the early 1980s, Doel Group got four of its companies listed with DSE in the 1990s and enjoyed massive capitalisation in 1996.
Following some money laundering allegations against the non-Bengali entrepreneurs, the companies became sick in the 2000s and did not turn their business around.
Their shareholders forgot the terms of annual general meetings and dividends.
Bangladesh Chemical Industries was the first Doel Group entity to be listed with the DSE in 1992. The nearly 12-crore paid-up capital company, now out of operation, posted losses each year to gradually shrink its net asset value per share to minus Tk12. Sponsors and directors hold 43% of the company shares.
Bangladesh Dyeing and Finishing came to the market in 1994 and the OTC board revealed it has a positive NAV of Tk80 against the face value of Tk100 each. But it is incurring losses every year. Outsider investors still own 60% of the company.
The zipper company had its debut in 1995 and now its liability per share has crossed Tk35 against the face value of Tk100 each. Sponsors and directors own only 34% of the Tk8.8-crore paid-up capital company.
BD Luggage Industries entered the stock market in the notorious bubble of the country's history.
Its liability crossed 70% of its paid-up capital and it continues posting losses each year. Insiders own half of the Tk20-crore paid-up capital company.
The zipper and luggage companies had issued debentures in the mid-1990s. And the fate of investors in these debentures was nothing different as they faced irregular repayments, non-payment of both principal and interest over years, like most of the listed debentures entering the market in the 1990s.
Kejriwal told The Business Standard that they had paid back investors of BD Luggage Debenture in the early 2000s, inviting claims through newspaper advertisements. They would only pay the zipper company debenture investors now.
OTC and delisting
Non-communication and non-response to the securities modernisation initiative has pushed more than five dozen listed companies into the OTC market of the bourses.
Some have come back to the main platform, overcoming their shortcomings, and most are still stuck in the market where buyers and sellers barely succeed to encounter transactions.
The bourses had earlier delisted some companies at various stages of their journeys in due cases.
However, the delisting has been bitter for investors as the sick companies have neither offered any opportunity to exit nor brought the management under obligation to comply with investors' rights.
However, the BSEC, under its new leadership this year, is trying to ensure the accountability of the entrepreneurs of failing companies.