Regulator calls 22 ‘Z category’ companies for hearing

The Bangladesh Securities and Exchange Commission (BSEC) wants to help improve underperforming listed companies on a case by case basis so that they can break the cycle of consistent poor performance.

For this reason, the stock market regulator on Thursday issued letters to 22 out of 42 Z category companies, asking them to attend hearings at the commission.

Beach Hatchery, Tallu Spinning Mills, Dulamia Cotton Spinning Mills, Al-Haj Textile Mills, Savar Refractories, Keya Cosmetics, Padma Islami Life Insurance, Shyampur Sugar Mills and Zeal Bangla Sugar Mills are some of the mentionable companies in the list.

The regulator also asked the companies to submit specific and detailed proposals along with appropriate action plans of their business strategies, in a bid to improve their operational and financial performance to help them run profitably, so that they can exit the Z category.  

According to sources, the BSEC wants to discuss the problems with each company's management. It also wants to identify their problems and discuss how those can be resolved. 

These companies have different problems that are not common. That is why the regulator is trying to solve them separately, they added. 

The regulator also sought some documents, such as latest annual financial statements, present status of all assets, shareholding position, liabilities, inventories and tax/vat return details, from those companies.

Professor Shibli Rubayat Ul Islam, chairman of BSEC, previously told The Business Standard, "We want to support underperforming listed companies so that they can play a positive role in the capital market.

"There are some companies in the market that are trying to do better, and we want to resolve their problems by discussing facts."

For example, the commission has sent a letter to the listed company Beach Hatchery Ltd. The company has been trading in the Z category from October 26, 2016 in the stock exchanges, said sources.

The company's management has failed to improve within this time. The company has also failed to declare dividend and hold an annual general meeting. During this period, the company was not in operation continuously for more than four years.

Besides, its net operating income and cash flow are also negative.

As a result, the company is not appropriately growing and the general shareholders of the firm are not getting dividends for a long period. This is detrimental to the interest of the investors of the company and undesirable to the commission.

Recently, the regulator took massive steps to bring the Z category companies back to the track. 

If a company fails to pay cash dividends for two consecutive years, it would drop into the Z category. The same would be applicable for the companies which fail to conduct AGM (annual general meetings) for two consecutive years or remain out of operations for six months.

Listed companies with net operating loss or even negative cash flow from operations for two consecutive years will also be in the Z category. Companies with negative retained earnings surpassing their own paid-up capital will be placed in this category too.

Besides, stock exchanges can send any company to Z category with the commission's approval if the company violates the securities law.