Battle with lender devastates Al-Haj Textile  

The shareholders of Al-Haj Textile Mills are facing a dwindling fate because of the falling business and the long legal battle with its lender.

The textile manufacturer – one of the oldest listed companies – posted losses for the last two consecutive years and its net asset value per share fell below the face value of Tk10.

The textile company on Thursday reported losses per share of Tk1.88 for the 2018-19 fiscal year, which came down to Tk0.93 for the 2019-20 fiscal year.

Thanks to the factory shutdown since the beginning of June 2019, the company could at least save some bucks and reduce losses.

Neither Al-Haj Textiles' sponsor-directors holding 12.78% shares, nor institutional investors holding 10.52% shares, and the general public owning more than 76% shares will get any dividends now.

They were getting at least a 5% cash along with a 10% stock dividend till 2017-18 as the company was posting more than Tk1 as profit per share.

What went wrong?

Al-Haj Textiles has been fighting a decade-long battle with Agrani Bank where the lender claims that the company had defaulted on its loans and it was not bankable with other lenders.

The textile company had to go through factory closures for two years more than a decade ago, as it was not able to open any letter of credit with banks for raw material imports.

The company sued its lender claiming Tk437 crore in compensation for the "bank's non-cooperation."  

To end the long-lasting legal battle, in 2019 the Supreme Court ordered the bank to pay more than Tk55 crore to the company to settle the case.

In response, the lender issued bank drafts in favour of the company worth more than Tk35 crore and applied for reviewing the apex court order.

Meanwhile, Agrani Bank still holds its claim on the "defaulted" Tk36 crore and did not clear the way for the company to turn bankable again.

Suffering from a business decline in fiscal 2018-19, the company finally closed its factory and retrenched workers in the middle of 2019, which helped it minimise the loss at least.

"We could not think of reopening the factory without bank support," said Al-Haj Textile Company Secretary AKM Azharul Islam, "it is a standstill period for the company."

Another official said the company cannot even utilise the funds the bank paid it following the court order last year, as the lender had filed a review petition.

The volatility

Al-Haj Textile shareholders have been seeking a concrete answer to their question "what will come next?"

Any good news from the courtroom suddenly pushes the share price of the mid-cap company up, while no concrete development again brings it down.

However, since 2014, the trend is down as stock price fell to Tk36 from over Tk180 six years ago.

If Al-Haj Textile wins the battle with the bank, there are hopes for at least some one-off gains and if the company gets its credit information bureau status cleaned, there are also hopes for business continuation, explain market analysts.

Some analysts are sceptical about the ability of the company to compete well in the textile business with its old establishments even if it manages a comeback. 

Incorporated as a private limited company in 1962, Al-haj Textile Mills remains one of the oldest manufacturers of cotton yarn in Bangladesh. The mill's manufacturing units are located in Pabna. 

After the independence of the country in 1971, like all textile entities, the mill was nationalised, and then again denationalised in 1982.

Al-Haj Textile got listed on the Dhaka Stock Exchange in 1983.
Over the years after denationalisation, Al-Haj Textile continued operations with its original board of directors and two added independent directors.

Now the company is likely to face board reconstruction because of its way less than 30% shares held by sponsors and directors. 

On Thursday, Al-Haj Textile shares closed 7.7% lower at Tk36.2.