The Dhaka Stock Exchange has rejected a Sonali Paper and Board Mills appeal for trading of its shares on the main board of the bourse as the low-profile company failed to comply fully with the listing rules.
The company failed to make it despite getting exemption from a number of rules from stock market regulator Bangladesh Securities and Exchange Commission.
The DSE made the decision at a board meeting held on February 6 as Sonali Paper, which has been trading on the bourse’s over-the-counter market for 10 years, did not have positive net current asset for the last three financial years, which is non-compliance with the DSE listing regulations, DSE officials said.
The premier bourse on October 1, 2009 delisted 51 ‘Z’ category issues including Sonali Paper and placed them on the OTC trading floor.
The companies were ousted from the main board due to their non-performance in business and failure in holding annual general meetings and providing dividend to the shareholders over the years.
Company officials said that Sonali Paper felt that taking waiver for positive net current asset was not needed as it was related to net cash flow for which the company was given exemption.
Therefore, the company had not sought waiver regarding the rules from the commission before but sought the exemption on February 4, they said.
The company on November 27 applied to the stock exchanges for trading its shares on the main market following taking exemption from the BSEC from around 15 provisions of listing rules of the bourses including requirement of having minimum paid-up capital of Tk 30 crore and net positive cash flow for immediate three financial years.
Despite knowing the fact that market manipulation mainly occurs surrounding the small-capitalised companies, the BSEC provided the exemptions to a low-profile company, market operators said.
Sonali Paper has raised gradually its paid-up capital by declaring bonus dividend since 2011 and its paid-up capital stood at Tk 16.63 crore in 2019. The company did not declare dividend in 2017 and 2018.
The company’s net profit after tax shot up by 105 per cent to Tk 6.3 crore in 2019 against Tk 3.07 crore in 2018, and the company never before witnessed such a jump in profit.
Market analysts said that companies usually inflated profits in their financial statements for different purposes, and the regulator should assess the reason for any significant deviation in the figures.
Of the 1.66 crore shares of Sonali Paper, 72 per cent is held by sponsor-directors and around 45 lakh shares are free-float.
The price earnings ratio of the company was 65 in 2019, indicating risky stocks and forbidden for margin loans as per the BSEC rules.
Sonali Paper company secretary Rashedul Hossain told New Age that the company sought exemption from the listing regulation related to positive net current asset from the regulator.
He said that the profits of the company rose significantly due to an increase in sales and change of the taxation policy.
The company’s web site is under construction, he said.
The company in a letter on February 4 sought the exemption from the listing regulation related to positive net current asset from the market regulator saying that the company was trying to improve liquidity position by generating more cash flow through improving operating activities such as increasing revenue.
DSE officials said that the company could not improve liquidity in the last five years, so it was not realistic that the company could improve it in near future.
The company is yet to build its web site with adequate information as per regulatory requirement.
Share prices of the small capitalised companies like Stylecraft, Pharma Aid and Monno Jute Stafflers fluctuate heavily due to low number of shares of the companies. There are 32 listed companies whose paid-up capitals are below Tk 10 crore which perceived as risky stocks as share prices of the companies fluctuate most.
Share prices of Sonali Paper soared to Tk 273 each on the OTC market on January 30 this year.
The BSEC led by its chairman M Khairul Hossain has been widely criticised for listing fundamentally weak companies.
Yet, the BSEC has recently listed Coppertech Industries and Ring Shine Textile, and moved to bring the low-profile Sonali Paper from the OTC market to the main board.
Sonali Paper started its operations in 1977 and the company got listed on the DSE in 1985.
After years of poor performance, the company was taken over by Younus Group in 2006.
Sonali Paper produces different GSM White writing and printing papers with two units. There are currently two machines with a production capacity of 45,000 kilogram a day.
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