fstcap

Bank Asia has announced an auction to sell the assets of publicly listed Hamid Fabrics, a subsidiary of Mahin Group, in a bid to recover an outstanding loan of Tk55.96 crore. The auction follows provisions of the Money Loan Court Act, 2003.

The notice, published in daily newspapers last week, invites interested buyers to submit price quotations by 29 December. The auction includes 296.50 decimals of land, along with the factory building and machinery, located in Narsingdi, all owned by Hamid Fabrics.

Abdullah Al Mahmud, managing director of Hamid Fabrics, told TBS, “This is very unfortunate. We are in talks with the bank to resolve the matter and hope it will be resolved soon.”

Sources at the bank said the company initially took a demand loan for working capital, which was later converted into a term loan. Despite multiple notices, Hamid Fabrics failed to make timely loan installments, prompting the auction proceedings.

Hamid Fabrics’ factory has three production units. The woven fabric unit has an installed capacity to produce 32.40 million yards annually, while the weaving units have an annual capacity of 9.88 million yards, and the dyeing unit has about 1.37 million kg yarn capacity.

According to its financial report, Hamid Fabrics has assets valued at Tk571 crore and equity totalling Tk 296 crore.

According to industry insiders, the entire Narayanganj-Narsingdi region is severely impacted by a gas crisis, including the area where Hamid’s factory is located. Consequently, most factories in the region have been unable to operate at full capacity.

To mitigate this issue, Hamid Fabrics invested in and activated alternative energy sources like LPG, incurring costs of at least Tk10 lakh every 36 to 48 hours. This has significantly increased their operational expenses, said a senior officer of the company.

Business deterioration

Hamid Fabrics reported that its revenue dropped over 52% to Tk24.87 crore in the July-September quarter of the fiscal year 2024-25 compared to the same time of the previous year.

During the period, it incurred a loss of Tk9.65 crore. At the end of September, its earnings per share stood at Tk1.06 negative.

The company said in its price-sensitive statement, that revenue has decreased significantly due to a reduction of sale orders from the global buyers. As a result, profitability during the quarter has decreased accordingly which has affected earnings per share.

The board of the company has decided not to pay dividends to its shareholders for the last fiscal year due to incurring a Tk37 crore loss.

The auditor of the company said in the audited report for FY24, that Hamid Fabrics has provided cash salaries amounting to Tk1.28 crore to head office employees and Tk1.56 crore to factory employees, which constitutes a violation of the Income Tax Act 2023.

Its highest dividend payout was 20% in FY14 and FY15. Since then, the dividend payout has gradually decreased. In the last three years leading up to FY23, it has only paid a 5% cash dividend to its shareholders.

Hamid Fabrics was listed on the stock exchanges in 2014. It raised Tk105 crore through issuing shares at Tk35 each including a premium of Tk25.

It spent Tk30 crore for repaying loans from the public fund, while Tk72 crore for business expansion.

Hamid Fabrics shares ended 3.12% lower at Tk9.30 on Thursday at the Dhaka Stock Exchange.

HFL

To meet regulatory requirements, Salvo Chemical Industry Ltd has revised its plan and now decides to issue shares at Tk 16 each to its existing sponsor-directors, instead of the earlier price of Tk 10 each.

In a price-sensitive disclosure on Thursday, the company referred to earlier news from May 23, and said the board of directors

decided to re-apply to the Bangladesh Securities and Exchange Commission (BSEC) with the new share price of Tk 16 each, including a premium of Tk 6.

In March this year, the BSEC asked Salvo Chemical to ensure that sponsor-directors hold a minimum 30 per cent stake in the company within a year. Currently, sponsor-directors hold 25.18 per cent, meaning the newly issued shares will help raise their stake to meet the regulatory requirement.

Following the regulatory order, the board of of Salvo Chemical had initially approved a plan on May 23 to increase the paid-up capital by issuing 6.4 million new shares to its existing sponsor-directors through a private placement at Tk 10 each.

The company then applied to raise Tk 64 million through the issuance of 6.4 million shares, but now, with the revised share price, the total amount will increase accordingly.

When the company initially decided to issue shares at face value, the share price in the secondary market was Tk 50 each, raising concerns that the move would be unfair to general shareholders, as this will result in significant dilution of earnings. General shareholders will be losers as sponsors-directors will get shares cheaply.

The increase in the number of shares will dilute earnings per share, meaning general shareholders, who currently hold a 66.44 per cent stake in the company, will have to share profits with sponsor-directors disproportionately.

However, on October 15, the securities regulator rejected Salvo Chemicals’ request to raise its paid-up capital by issuing shares at Tk 10 each to the company’s existing sponsors and directors through private placement, citing the need to protect the greater interest of general investors.

Salvo Chemical, which produces sulphuric acid, sulphate, battery-grade water and glucose, has reported a 12 per cent year-on-year higher profit to Tk 108 million in FY24, riding on higher sales.

Its first-quarter profit, however, plummeted 82 per cent year-on-year to Tk 8.45 million for the July-September period this year due to higher production costs and rising raw material prices, both locally and for imports.

The company’s stock price closed at Tk 24.1 on Thursday, losing 4.75 per cent over the day before.