Labour unrest, capital shortage force Generation Next to shut down
General investors are the majority shareholders of the publicly listed firm, but their future remains uncertain
Generation Next Fashions, a publicly listed apparel manufacturing firm, has permanently closed its factory operations due to labour unrest and a working capital shortage, with its managing director, chairman, and directors reportedly fleeing the country.
The factory closure was primarily attributed to two factors: the inability to make decisions during board of directors' meetings due to an incomplete quorum, and the inability to conduct banking transactions because of the absence of authorised signatories, according to disclosure published on the Dhaka Stock Exchange's website today.
Market insiders said the closure of the factory operations has caused significant problems for general shareholders of the company, who hold over 80% of the stake. Over the past few months, the share price dropped below its face value of Tk10, closing at Tk4.4 each on Monday.
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According to company officials, Generation Next Fashions has suspended its factory operations since 9 September due to labour unrest over unpaid wages. To demand their salaries, workers staged strikes and protests in September and October.
In a disclosure about the worsening situation following labour unrest and the suspension of operations, a director of the company, Shaheen Akther Chaudhury, informed the Dhaka Stock Exchange (DSE) on 3 November that they had submitted a letter to the securities regulator on 20 October regarding the cessation of operations due to a shortage of working capital.
In her letter, she also noted that the chairman and managing director of the company are unreachable and may be out of the country.
In the absence of the chairman, MD, and other directors, the company is facing significant problems, said Shaheen Akther, seeking advice from the BSEC to overcome the crisis.
Fate of the investors remains to be seen
General investors are the majority shareholder of the publicly listed firm, according to the data of the Dhaka Stock Exchange (DSE). However, the future of these investors is uncertain as of now.
As of September, sponsor-directors owned only a 16.26% share of the company, and the rest shares were held by the institutional investors and the public shareholders by 21.35% and 62.39% respectively, according to its shareholding reports.
Established as a private limited company in 2004, Generation Next Fashions Ltd entered the capital market in 2012, raising Tk30 crore through an initial public offering (IPO).
According to the latest report from the DSE, company owners Tauhidul Islam Chaudhury, a sponsor director with a 5.13% stake; AJ Corporation with 6.97%; managing director of AJ Corporation Indian national Rajib Sethi with 2%; director Alavee Azfar Chaudhury with 2.12%; and Shaheen Akhter Chaudhury with 0.04%.
Generation Next Fashions has been faring well in the past few fiscal years with high demand for its products among global buyers, according to sources.
According to its financial reports since fiscal years 2018-19, it generated Tk518 crore in revenue and Tk21 crore in profit in FY19, Tk292 crore in revenue with a Tk0.33 crore profit in FY21 and Tk596 crore in revenue and Tk3.41 crore in profit in FY23. In the first nine months of FY24, it incurred around Tk1.86 crore in losses.
Since its listing in 2012, it paid only stock dividends ranging from 10% to 20%. It did not pay any dividends in FY19, FY20 and FY21 amid declining profitability. Lastly, it paid a 1% cash dividend in FY22 and FY23.
