Ring Shine lets go of expansion plan, uses IPO fund as working capital

Ring Shine Textiles Limited, which once planned to spend its initial public offering (IPO) fund on business expansion, is now having a hard time staying afloat, and has decided to use the fund as working capital instead.

The company raised Tk150 crore from the stock market in 2019. Of the fund, it was supposed to use Tk96 crore for machinery acquisition, Tk50 crore for loan repayment, and the remaining Tk4 crore for IPO expenses, as per its IPO prospectus.

Although the company did ensure the repayment of its loans and meeting other expenses, it failed to purchase machinery for business expansion.

Now, the company will use a total Tk66.4 crore of the IPO fund as working capital in phases, while around Tk30 crore is lying unused.

Of the Tk66.4 crore, Tk18.4 crore has been recently released by the Bangladesh Securities and Exchange Commission (BSEC) for Ring Shine to use as working capital.

The company will use this amount to pay the outstanding salaries of the employees who resigned or were retrenched from the company earlier.

In 2021, the BSEC had released Tk40 crore from the IPO fund as working capital. Of the amount, Tk15 crore was used for workers' retrenchment payment, Tk16 crore for bank loan repayment, Tk3 crore was paid to Bangladesh Export Processing Zones Authority (Bepza), Tk3.5 crore to Titas Gas, and Tk2.5 crore for miscellaneous expenses.

Seeking anonymity, a top official of the company said Ring Shine is currently running partially. The company is operating at 60% of its capacity, an improvement from 15% earlier.

The letter of credit (LC) problem has been solved as the Premier Bank has issued LCs, he added.

He said it was urgent for the company to pay the outstanding salaries of its ex-employees.

"Now, the company is paying its current employees from the company funds," he added.

Ring Shine manufactures dyed yarn, and gray 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.

A few months ago, Wise Star Textile Mills Ltd – a private company run by listed company Queen South Textile's owner – showed interest in taking over Ring Shine Textiles Ltd.

Meanwhile, the commission had allowed Bepza to transfer the sponsor-director shares of Ring Shine to a suitable buyer.

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.

In the October to December quarter of fiscal 2022-23, the company's revenue fell by 45% to Tk39.46 crore, compared to the same quarter of the previous fiscal.

Its cost of sales, during the period, increased by 26% to Tk49.89 crore year-on-year.

As a result, the company's net loss deepened and stood at Tk19.23 crore in the quarter, which was Tk38 lakh a year ago.

Its loss per share stood at Tk0.38 and net asset value per share at negative Tk3.23.

The last closing share price of the company on the Dhaka Stock Exchange was Tk9.80 on Monday.

What went wrong with Ring Shine

Ring Shine Textiles was listed on the stock exchanges in 2019. By issuing pre-IPO shares, also known as placement shares, to its existing sponsor-directors and 73 external local shareholders, the company became a Tk285.05 crore paid-up capital company from Tk9.95 crore.

But 11 sponsor-directors and 33 external shareholders did not make any payment against their allotted shares.

In September 2020, its production stopped because of the Covid-19 pandemic.

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

In January 2021, the stock market regulator restructured the company's board of directors in a move to bring the company 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.