Ring Shine raises red flag on stake acquisition by Wise Star and five other cos
Ring Shine’s existing board found that there is no record of Wise Star’s commercial operations since its inception in 2021
The board of directors of Ring Shine Textiles Ltd has expressed concerns about the credibility of the six companies that are set to collectively take over 38% stake in the textile firm.
This August, the Bangladesh Securities and Exchange Commission (BSEC) conditionally allowed Wise Star Textile Mills Ltd and five Singapore-based companies to buy Ring Shine's shares, including those held by the sponsor-directors.
Ring Shine's Company Secretary Auniruddho Piaal informed The Business Standard that the company's existing board conveyed its opinion about the prospective owners to the BSEC, so that Ring Shine is not held accountable if any issue arises after the takeover.
According to BSEC officials and Ring Shine sources, Wise Star will hold only 2% shares. The remaining 36% will be held by the other five companies.
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Why the concern
Ring Shine's existing board found that there is no record of Wise Star's commercial operations since its inception in 2021. Yet, it has a paid-up capital of Tk20,000 and authorised capital of Tk3 crore.
Whereas, Ring Shine has always been in active operations since 1998, and has a paid-up capital of Tk500 crore and authorised capital of Tk540 crore.
This massive paid-up capital difference is what made Ring Shine's directors frown and doubt Wise Star's financial strength to take over the operations of Ring Shine.
Also, it has been recently found that Wong Jammy Kwok Chan, who was the chairman of Wise Star, has resigned. Now, Wong Elisa Dai Wah is the chairman of Wise Star Textile, according to Ring Shine and BSEC sources.
At present, Wong Jammy Kwok Chan is the managing director of Queen South Textile, a listed firm on the stock exchanges.
Of the Wise Star Textile shares, 50% is held by Wong Elisa, and the other half by the company's existing Managing Director Wong Kwok Chuen.
Ring Shine's struggles
Ring Shine was the first big manufacturing company to raise Tk150 crore through an initial public offering (IPO) using the fixed price method in 2019. But after listing, it could not do business properly due to a number of issues.
In January 2020, all its Taiwanese sponsor-directors, along with many high-ranking officials, exited without any prior notice.
Because of the uncertainty created by their departure, the BSEC asked the Bangladesh Bank to freeze Ring Shine's IPO fund account. After that, the company faced hardships in operating its factory.
In September 2020, its production stopped because of the Covid pandemic.
The company said a working capital shortfall, a decline in orders from foreign buyers, and a raw material shortage led to the factory shutdown.
In January 2021, the BSEC restructured the company's board in a move to get it out of its worsening condition.
For this, the BSEC appointed seven independent directors to observe the company's overall condition and make a plan on how to operate it. In June 2021, the factory went back into production.
