A ray of hope for worried Ring Shine investors

In 2019, investors raced for a slice of Ring Shine Textile Limited's shares in the hope of a good yield.

But their dream got shattered in less than one year when the cent percent export-oriented company stopped its production last year amid the Covid-19 pandemic.

Now the investors again see the light at the end of the tunnel after the stock market regulator came to the rescue of the company engaged in manufacturing gray and finished fleece fabrics of various qualities and dyed yarn.

In January this year, the Bangladesh Securities and Exchange Commission (BSEC) reconstructed the board of the company consisting of former police officials, Dhaka University teachers, former bankers, and market professionals after the company had failed to run the factory.

Also, the stock market regulator has appointed a special auditor and set up a committee to investigate the reason behind the failure of the company owned by entrepreneurs from Singapore.  

The new board has already visited the factory in the Dhaka Export Processing Zone (DEPZ) in Gazipur, identified some problems and set a target to resume operation by the next two months.

Istak Ahmed Shimul, an independent director of the reconstructed board, told The Business Standard, "The company is facing working capital and raw material shortage. It has received many orders but cannot go into production right now."

"The workers of the company did not get the salary of around two months. EPZ rent and Titas Gas bill are also due. After resolving all issues, it will be possible to go into production soon."

The steps taken by the new board

According to sources in the reconstructed board, Ring Shine is a good compliant foreign enterprise having standard machinery setup, warehouse and effluent treatment plant (ETP).

But because of a lack of raw material and shortage of working capital, it could not go into operation and all the demand for its products has increased.

According to the 2019 audited report, the company has a term loan of Tk370 crore which has not been classified yet.

The sources said that the board has requested approval from the securities regulator to use 40% of its unutilised initial public offering (IPO) fund as working capital.

The board is also looking for other sources of funds to meet the capital shortage.

The factory had three gas connections but the authorities concerned have cut-off two lines after it had failed to pay the bill.

EPZ authority's rent bill is also due for seven to eight months.

The board directors talked to all the authorities concerned regarding the dues, and the authorities have shown a positive approach, helping the company see the hope of getting back to life.

In 2019, the company raised Tk150 crore through an IPO for its business expansion.

According to the IPO proceeding, Ring Shine was supposed to use Tk96.40 crore for the acquisition of machinery and equipment and Tk50 crore for loan repayment.

As of August 2020, the company used the fund for loan repayment and the rest of the amount remains unutilised.

Investors are in despair

In the hope of a better reward, investors invested their money but closed down the factory, leaving the investors in despair.

Ring Shines share price has plummeted and currently it is staying below the issue price.

The company issued its shares at the face value of Tk10 but the price was Tk6.40 on Thursday.

After getting listed in 2019, the company fell into crisis because of the Covid-29 pandemic as the foreign clients' demand decreased and it shut down the factory in September 2020.

The company extended the factory closure deadline several times and finally could not return to operation, prompting the regulator to step in.

The way profit maker plunged into trouble

When the company got listed on stock exchanges, it was in good shape.

It posted a profit of more than Tk50 crore on average, for three years from FY2017 to FY2019.

Fiscal 2019-2020 has ended more than seven and a half months ago, but it failed to publish the annual financial statement. Investors are also in the dark about when the company will disclose its financials.

In the first half of FY20, the company reported a profit of Tk37.32 crore. But in the January-March quarter of 2020, it fell into losses and incurred a loss of Tk7.91 crore.