“The company can borrow from banks, take loans from directors or collect fresh capital as equity from directors issuing new shares”
The Bangladesh Welding Electrode Ltd (BD Welding) is now in need of fresh capital to start its operation in relocated facilities.
Under a revival plan, the company sold its factory land in Chattogram in 2017 and got rid of rearranged bank liabilities with most of the money. The rest of the amount has been spent on buying a piece of land near Dhaka to relocate the factory.
"The company now needs fresh capital to procure the entire land, develop it and later establish a factory there and finally run it (the relocated plant)," said SM Nurul Islam, managing director of the listed company.
"The company can borrow from banks, take loans from directors or collect fresh capital as equity from directors issuing new shares," he told The Business Standard over phone.
Alif group, a local private sector investor group, is interested in coming to the board of BD Welding by buying the company's 25 percent share at an agreed rate from the state-owned Investment Corporation of Bangladesh (ICB).
The two parties also signed a memorandum of understanding (MoU) in July this year, according to a BD welding filing with the Dhaka Stock Exchange (DSE).
Alif group wants to be in the board of BD Welding as the major shareholder and among the above three financing modes it seems that they are more interested in the third option, said SM Nurul Islam, who owns around 5 percent of the company at present.
"We are waiting for a regulatory approval on the planed share transfer by our largest shareholder ICB to the interested investor group."
If approved by the securities regulator Bangladesh Securities and Exchange Commission (BSEC) the ICB representatives will leave the board of BD Welding and Alif group will take charge in cooperation with the existing Managing Director, he added.
Slump of the reputed welding electrode rod manufacturer
The manufacturing entity, which was established in 1969, was the first welding electrode manufacturing facility in the then East Pakistan with total plant and machinery from Switzerland.
This industry was taken over by the government of Bangladesh in 1973 as an abandoned property.
In 1984, the government divested it and a former bureaucrat as the highest bidder purchased the factory. It was a private company until 1997 and was engaged in manufacturing welding electrodes for world renowned brand Oerlikon for about 12 years under a technical collaboration and a licencing agreement with Oerlikon Welding Ltd, Zurich.
After the contractual arrangement with the Swiss company was over, the BD welding acquired electrode-making formulations for about 30 brands with detailed raw-material specifications and got their own brands as an independent manufacturer along with many international quality credentials.
Those brands like Volta marine, Super-X-plus and some others were catering to many big local industrial buyers and many of them had been top players in their industries.
In 1999, the private company entered the stock market to collect funds in setting up an oxygen plant in Chattogram.
It was competing with multinational player Linde Bangladesh (previously known as Bangladesh Oxygen Company) and some new entrants until their raw material imports were disrupted because of no banking support for default loans.
Losing edge gradually pushed the company lower and lower and ended up with production halt.
In 2009, five out of eight sponsors sold their entire holding to the ICB and now the state-owned investment entity is chairing and controlling the BD Welding board.
Scepticism and speculations in the street
According to the fundamental analysts at various equity research teams, BD welding is nothing but a "saleable past and hopes'" as the company's track record in business over the last decade is not pleasant to shareholders.
They mentioned that the company has chronic problems with insurers and the tax authority and many other things. Internal clashes even ran up to courts. But the biggest source of general investors' scepticism is poor management, insiders' embezzlement record and the overall lack of good governance.
Investors still remember Managing Director of the BD Welding SM Nurul Islam's conviction in a case filed by Bangladesh Securities and Exchange Commission (BSEC) and they also laud him for his expertise in the technical field of manufacturing and marketing welding products.
The managing director was sent to jail few years back for providing a business weekly with a false e-mail information that the company was going to receive a significant foreign investment in the bull market of 2007-10.
He along with some other directors had dumped the BD Welding shares at a skyrocketed price following the false optimism.
Denying any malafide intention, Islam, however, claimed that he sold company stocks to save general shareholders as the proceeds were lent to the company for turning banks away from auctioning its properties in bad times.
If any new group takes the responsibility to resolve all the issues hanging around the company for years, they should be welcomed as shareholders' fate is depending on the new leadership's success.
Rumours on Alif group's interest in the BD Welding had caused a sharp spike in the company shares at the DSE in July. The shares jumped from Tk12 to Tk22 in the two week's trading.
But the price reversed to the mean as investors started recalling Alif's previous case of being interested to take over Central Pharma in early 2017. The drugs producer stuck in a huge tax dispute had witnessed a 200 percent price gain within less than a six-month period at that time. But as Alif group opted out, Central Pharma share price nosedived to historic lows.
No update on business and financials
In the last annual general meeting held in December 2017 and the relevant annual report for the financial year 2016-17, the BD Welding disclosed all the problems within the company and challenges in its business. Hopes were also there.
In the first three quarters of fiscal year 2017-18, the company managed to limit its loss per share within Tk0.46. The company's net asset value per share was seen to be at Tk11.57.
But since then 18 months have gone past. The company neither disclosed any update on business nor anything about financials.
"We are trying our best to be back in the business. But too many challenges and fund crisis are deepening the pressure."
The managing director of the company expressed his hope to come up with the updated accounts soon.
The company is going to face penalties by the BSEC for non-submission of timely financial reports.