In a bid to get underperforming listed companies back on track, the Bangladesh Securities and Exchange Commission (BSEC) has asked Delta Spinners Ltd to reconstruct its board of directors.
The textile company is required to do this because it has been in the Z category for two consecutive years and its sponsors and directors collectively own less than the 30% shares which are mandatory.
Now, listed companies must welcome independent directors approved by the BSEC on their boards in case of noncompliance with the 30% shareholding directive – where the independent directors would ensure the desired development.
If existing sponsor directors fail to increase stakes, the company is required to welcome investors who individually have 2% or more of the company's shares on board.
Meanwhile, companies which remain in the Z category for at least two consecutive years also must appoint independent directors and submit a turnaround plan. Failure to do this results in the removal of the existing directors.
Delta Spinners stopped paying cash dividends after 2015 and also stopped arranging shareholders' general meetings in 2018.
It has been in the Z category since the beginning of 2019 and its stock price tumbled below the face value of Tk10 each. At the Dhaka Stock Exchange, the company shares were being traded for a price nine times higher than that 11 years ago.
The rise and fall Delta Spinners
In 1994, Jatiya Party politician Mostafa Jamal Haider led the incorporation of the spinning mill at Kaltapara in Gouripur of Mymensingh and the company was listed in the stock market in 1995.
It was doing well even until the early 2010s as enough yarn was sold, employees were happy at work and shareholders were receiving dividends.
The company issued right shares thrice in 1996, 2010 and at last in 2014 at the bourses to finance its business expansion.
Share multiplication helped Delta Spinners merely grow to a Tk166 crore paid-up capital company.
The company also expanded its yarn manufacturing capacity by two-thirds with the latest round of capital accumulation through two right shares against every single existing share in 2014.
It took additional years to implement the project, during which time the struggle of the yarn market's players also emerged as a harsh reality.
The company's latest annual report reveals that over the 2012-2017 period, its production and sale of yarn hovered around 25 lakh kilogrammes every year, while its revenue dropped from more than Tk166 crore in 2012-2013 to Tk107 crore for 2016-2017.
Additionally, the company initiated a venture for ceramic manufacturing with subscribing to 80% shares in Delta Ceramics Ltd, but a land dispute with the forest department did not allow the company to accomplish its factory project.
Investment made in land and land development remains a fruitless endeavour for the ceramic subsidiary.
Once, a decade ago, Tk50-100 was the popular range for Delta Spinners' shares, which collapsed to as low as Tk2.7 in early 2020.
On top of everything, investors now dislike that the company has not been publishing its annual reports since the one for 2016-2017 was up for analysis.
However, the company's last unaudited quarterly statement reported less than Tk27 crore of revenue over the July-September period of 2020, which was a little less than that over the same period a year ago. However, the company's earnings per share halved to Tk0.03.
As of 30 September, 2020 its net asset value per share was Tk13.76.
Delta Spinners Executive Director and Company Secretary Masudur Rahman did not respond to phone calls from The Business Standard.
One of his colleagues, however, said he is aware of the BSEC's letter.
Seeking anonymity, he also said the company directors are unlikely to buy further company shares from the market right now.
The company applied before the High Court to arrange the deferred annual general meetings for two years and securing the necessary permission, it would arrange three AGMs at a time.
During a visit to the company mills in last September, this reporter learned that the workers are being regularly paid including essential allowances.
However, the old spindles are gradually pushing the company into inefficiency in production, while dependency on local market weavers is also depriving the company of a better price.