BSEC allows struggling Ring Shine's conditional takeover

The Bangladesh Securities and Exchange Commission (BSEC) has conditionally allowed Wise Star Textile Mills and five Singapore-based private companies to take over struggling Ring Shine Textiles.

The market regulator earlier this month approved a proposal but has not yet issued a letter to this end, according to sources at the commission.

The six companies will take over 37.98% of the shares of Ring Shine, including those held by sponsors and directors.

Wise Star, a private firm run by the managing director of listed Queen South Textile, will take hold of only 2% of the shares, while the remaining 35.98% will be taken over by the Singapore-based companies at a negotiated price.

These shares will be placed in the public category for sponsors and directors, as the owners will be shareholder-directors, not sponsors.

The proposed owners will take over the liabilities and other dues of Ring Shine and will provide a guarantee so that banks regularise Ring Shine's loans.

Ring Shine was the first big manufacturing company to raise Tk150 crore using the fixed price method in 2019. But after listing, it could not do business properly due to numerous issues.

The company raised its paid-up capital from Tk9.95 crore to Tk285.05 crore by issuing pre-IPO shares, known as placement shares, to existing sponsors, directors, and 73 external local shareholders.

However, 11 sponsors and directors and 33 external shareholders did not make any payments against their allotted shares.

In September 2020, its production stopped because of the Covid pandemic.

A working capital shortfall, a decline in orders from foreign buyers, and a raw material shortage led to the factory shutdown.

In January 2021, the market regulator restructured the company's board in a move to get it out of its worsening condition.

For this, the BSEC appointed seven independent directors to observe the company's overall condition and make a plan on how to operate it. In June 2021, the factory went back into production.                                                     

After the transformation of shares, the new board will consider the paid-up capital, according to the commission's decision.

The new board will not take any legal liability for the previous board of directors' non-compliance with the company.

The commission will lift embargoes on the initial public offering (IPO) fund once the company runs properly.

It has also decided to nominate several independent directors for the company. 

BSEC Commissioner Shaikh Shamsuddin Ahmed said the commission has made this decision considering all the sides so that the company runs properly.

It will also take action against the previous entrepreneurs for irregularities, he added.  

An official of the company said the companies taking over Ring Shine have no new investment plan.

Singapore-based five private companies do not have any operations in Bangladesh, and Star Textile will hold only 2% of shares, which is a big risk for Ring Shine, he added.

Earlier in May this year, the current board of directors decided to hold an extraordinary general meeting (EGM) to consider the proposed takeover of sponsor-directors' shares of the company by Wise Star Textile Mills and its nominees.

Currently, the bank loans of Ring Shine Textiles stand at Tk550 crore, with Tk80 crore more due to the Bangladesh Export Processing Zones Authority (Bepza).

Ring Shine mainly manufactures dyed yarn and gray and finished fleece fabrics of various qualities for both local and international markets.

In the October-December quarter of FY23, its revenue dropped by 45% to Tk39.46 crore from Tk71.49 crore compared to the same period a year ago. But its cost of goods sold increased by 26% to Tk49.89 crore from its revenue. 

The net loss after tax stood at Tk19.23 crore, which was Tk38 lakh a year ago.