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Mozaffar Spinning makes another move to pickpocket share investors

2014-10-13 20:59:34
Mozaffar Spinning makes another move to pickpocket share investors

Rezwan Ahmed, thereport24.com, Dhaka:

Mozaffar Hossain Spinning Mills Limited has announced plan to collect capital from the stock market again after failing to make profits on the money it earlier collected through Initial Public Offering (IPO).

Analysts suspect the company has an ulterior motive as it is planning to collect capital from the share market multiple times after a short interval.

At the end of the year, the company increased its capital by issuing bonus share. Now it has announced to increase its capital yet again by issuing right shares, virtually to pickpocket the share market investors in connivance with the officials of Bangladesh Securities and Exchange Commission (BSEC), who have been following murky procedures for approving rights share issuance by listed companies.

Shareholders of the firm have also been deprived of the full disclosure of financial statement of the company even by violating the rules of the listed companies.

The company, which started with a capital of Tk 34.97 crore, collected Tk 27.50 crore from the stock market by going public through IPO. It collected the money early this year at the end IPO procedures.

Before it could derive benefit from the collected capital it had collected, the company announced it would increase the capital by Tk 15.61 crore at the rate of 25 percent for the fiscal year, which ended on June 30 this year. The firm wants to collect another Tk 117.14 crores and it issued three right shares against two ordinary shares on September 15. This means it is attempting to collect Tk 160 crore (4.58 times of its capital) through IPO, bonus shares and rights shares before a year has passed making the capital market analysts raising their eyebrows.

Stock market analyst Abu Ahmed told thereport24.com right shares have emerged as a new trap for the listed companies to pickpocket share market investors. He said he disapproves of the idea of allowing a company to issue right shares if at least three years have not passed since it was listed with the capital market.

Abu Ahmed, also a professor at the University of Dhaka, said a company should fully disclose the machines it bought with the IPO money and the products it produced.

“These companies, in fact, go public to run share business. They reach their target by raising share prices after announcing to issue right shares. Besides, it cannot be the duty of Bangladesh Securities and Exchange Commission to approve issuing right shares whenever a company seeks approval,” he said.

In the fiscal year ending on June 30, 2012, Mozaffar Hossain Spinning Mills’s earnings per share was Tk 2.78. The amount fell to Tk 2.62 in fiscal year that ended on June 30, 2014, i.e. after it went public. The company expanded its business using the IPO money, yet its earnings per share (EPS) dropped making its economic health shaky.

The fall in EPS led to lesser profits for the company’s sponsor directors in the post-IPO period. Investors buying shares of the company in the wake of EPS reaching Tk 2.78 were also frustrated to see that the figures did not appear as they had expected.

The company was given IPO approval based on its financial statements of the whole fiscal year ending on June 30, 2012, and till December 31 of the following year. Fiscal years till June 30, 2013, and 2014 have ended but the company has not yet published any information about the 2013 fiscal year, keeping its investors unaware of whether the company gained or made loss in that particular year violating rules.

Secretary of the company Shahajul Islam told thereport24.com the step to collect capital from the stock market again by issuing right shares was taken to launch new projects.

“As we got the IPO money in hand in February, we could not utilize it fully. Besides, we published all required information demanded by the stock exchange. We can also provide information about the fiscal year ending on June 30, 2013, upon request from the stock exchange,” he said.

Meanwhile, an official working at the listing section of Dhaka Stock Exchange, said the Research and Development Section oversees financial statements of listed companies.

Officials at the Research and Development Section, however, said they only publish the information received from the listing section, and do not collect information themselves.

Trade of shares of Mozaffar Hossain Spinning Mills Limited began at both the bourses on January 21 this year.

(This report has been translated by Mahmudul Islam and edited by Md. Al-Amin for thereport24.com/English)

Ends/thereport24.com/AMA/Oct 13, 2014

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