12 firms’ shares soar after sudden comeback from Category Z

The shares prices of 12 companies soared on the Dhaka Stock Exchange (DSE) on Wednesday after an unexpected comeback from Category Z.

In stock markets, junk shares or poor-quality companies are classified as Category Z.

The Bangladesh Securities and Exchange Commission (BSEC) had earlier allowed the companies to come out of Category Z and return to their previous position.

The 12 companies that came out of junk status on Wednesday are AB Bank, Appollo Ispat, BD Thai, HeidelbergCement, Libra Infusion, Khan Brothers PP Woven Bag Industries, Renwick Jajneswar, Safko Spinning, Salvo Chemical, Fu-Wang Ceramic, Zahintex and Prime Insurance.

When asked, Md Rezaul Karim, spokesperson and acting executive director of the BSEC, told The Business Standard, "I do not know how the companies have come back from Category Z."

Among them, AB Bank, Renwick Jajneswar, Prime Insurance, Libra Infusions and HeidelbergCement have been upgraded from Category Z to Category A.

The six other companies have been upgraded to Category B.

The stock exchange authorities changed the category of the companies on Wednesday morning on the instructions of the BSEC.

That information has also been revealed to investors through the DSE website.

But Prime Insurance, BD Thai, Salvo Chemical, Khan Brothers, Zahin Tex, Renwick Jajneswar, HeidelbergCement and Safko Spinning failed to pay any dividends for the 2018-19 financial year.

Besides, AB Bank recommended 5 percent stock dividends for the 2019 financial year but it failed to pay any dividend for 2018.

As per rules, if a company fails to pay any dividend, it should be placed in Category Z.

But new rules that were published on Wednesday said if a company failed to pay cash dividend for a period of two consecutive years from the date of declaration of the last dividend, it should be placed in Category Z.

An official at the DSE said it means the listed companies got an opportunity over dividend declaration.

He also said by using this clause, the companies have come back from Category Z.

The new laws also said non-holding of annual general meetings in the consequence of any writ-petition or any legal process pending before court, being sub-judice matter or in the event of force majeure, maximum two years may be considered for placement of securities to Category Z.

As per the rules, investors will not get any loan facility for 30 working days against these shares due to the change of category.

Through the website, the stock exchange authorities have informed lender merchant banks and brokerage houses not to give a loan facility on these shares for the next 30 working days.

It means investors will have to buy these shares in cash.

There were 54 listed companies in Category Z at the DSE.

As 12 companies have out of the junk status, the number of companies in Category Z has now come down to 42.