Union Capital's accumulated loss reached Tk1,000cr in 2023

Union Capital Limited—a non-bank financial institution (NBFI)—reported that its accumulated loss reached Tk1,084 crore in 2023, which was 68% of the company's total assets.

Its external auditor raised significant doubt about the company's ability to continue as a going concern, as the loss-making situation indicated a material uncertainty.

The NBFI approved its audited financial report for 2023 at a board meeting held on Thursday.

According to the company's financial report, its consolidated net loss was Tk607 crore in the last year, which was 195% higher than the previous year. Its consolidated earnings per share closed the year at a negative Tk35.17.

Its net asset value per share was negative Tk51.03 in 2023, which was negative Tk15.86 a year ago.

Union Capital said in the financial report that profit decreased mainly due to the high provision requirement against the non-performing loans lying with its subsidiary, UniCap Investment Limited.

Lower interest income due to the downgrading of non-performing loans and decreasing brokerage commission due to the sluggish trend in the capital market also played a significant role in the company's loss, it added.

In the January-March quarter of this year, it incurred a loss of Tk20.66 crore and the earnings per share were negative Tk1.20.

Moreover, it failed to pay dividends for the five consecutive years.

Its share closed at Tk7.40 each against the face value of Tk10 on the Dhaka Stock Exchange (DSE) on Thursday.

The fall of Union Capital

Taking over the equity market operations from Hong Kong-based Peregrine Capital, and securing an NBFI licence from the Bangladesh Bank, a group of local entrepreneurs began Union Capital in the late 1990s.

It entered the merchant banking business in the early 2000s and remained more focused on capital market operations than on leasing or lending businesses.

Its 2007 initial public offering was a great success as the capital market was a profitable business in the then bull market that continued till the end of 2010.

But the 2010-11 market crash made it all sour as the margin loans it disbursed among stock investors to let them buy more shares for leveraged gains turned bad.

Later, the brokerage and merchant banking operations were split, and the core NBFI increased traditional lending in the mid-2010s.

But it did not help at all as the fresh term loans were mostly given to large corporations who later defaulted.

In 2019, Union Capital incurred losses for the first time because of soaring provisions against bad assets and it still continues with even bigger losses amid non-recovery of bad loans, and inability to pay back depositors even after maturity.

What auditor says

The external auditor of the company said as qualified opinion in the audit report for 2023, the accumulated loss was 68% of the company's total assets.

Additionally, around 86.94% of the total loans are categorised as non-performing. Total liabilities of the company have increased by 31% in 2023, which was 155% of its total assets.

Moreover, Union Capital has been consistently making losses over the last five years and these situations raised concern about the ability to run the business, the auditor added.