Why Ring Shine cancelled dividend 3 years after declaration
The new board of the publicly listed Ring Shine Textiles Ltd has cancelled a dividend the company's former management had declared in the fiscal 2019-20 by overstating profit for that fiscal.
By reviewing the company's financial statements, the current board found that Ring Shine incurred a loss in FY20, let alone making a profit. And this is why the board cancelled the dividend, according to a disclosure by the company on the Dhaka Stock Exchange (DSE) website on Sunday.
Earlier, the Bangladesh Securities and Exchange Commission (BSEC) carried out a special audit of the company's financials, and the commission too found a loss.
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Seeking anonymity, a senior official at the company said Ring Shine had recommended 1% cash and 1% stock dividends for FY20. But the company, because of Covid-19, could not arrange the annual general meeting (AGM) for the shareholders' approval of the dividend. But it failed to conduct the AGM via an online platform too.
Meanwhile, the BSEC has recast the firm's board and conducted a special audit, and found lots of irregularities in the financial statements, the official added.
He said the new board also reviewed Ring Shine's financial statements and found misrepresentation of assets and liabilities, and a huge loss that was overstated as profit in FY20.
In that pending AGM which was finally held after the court's order, the shareholders did not approve the overstated financials and the said dividend, the official added.
Ring Shine Textiles raised Tk150 crore through an initial public offering (IPO) from the stock market in 2019 for business expansion and repayment of loans.
Although the company did ensure the repayment of its loans, it failed to purchase machinery for business expansion.
However, the company spent most of the IPO fund as working capital. The company did not pay any cash dividend since listing. Investors are deprived of returns by holding the company's shares.
The company is currently running only at 25% capacity down from 60% a few months back owing to a slowdown in buy orders.
Ring Shine manufactures dyed yarn and finished fleece fabrics of various qualities for both local and international markets.
The company's new board, along with the BSEC, is trying to revive the business in order to protect the interest of investors.
Wise Star Textile Mills Ltd – a private company run by listed company Queen South Textile's owner – has been trying to take over Ring Shine for a few months now. But there has been no development in that area till now.
On the contrary, production has decreased along with buy orders due to this taking-over process.
Earlier, Union Group showed interest in taking Ring Shine over but ultimately did not go through with it because of the huge debt burden of the company.
