BSEC seeks bonus share explanations from newly listed firms

KEY FINANCIALS OF 2 COMPANIES

• The companies declared bonus shares despite available IPO funds
• Associated Oxygen and Dominage Steel declared 8% bonus shares
• Associated Oxygen raised Tk15 crore and Dominage Steel Tk30 crore from capital market
• Associated Oxygen's EPS was Tk1.87 and Dominage Steel's Tk1.42 at the end of FY20
• Associated Oxygen is already listed but Dominage Steel's listing is in progress

The stock market regulator has sought explanations and justifications from newly listed companies that raised paid-up capital declaring stock dividends for their shareholders, sources have said.

The Bangladesh Securities and Exchange Commission (BSEC) has already issued letters in this regard.

Sources said the companies declared stock dividends in the last financial year, but their initial public offering (IPO) funds were yet to be used. They wanted to expand their businesses using IPO funds, but have yet to start the process.

The commission wants explanations and justifications for their move to raise paid-up capital by declaring stock dividends for shareholders.

Associated Oxygen Ltd raised Tk15 crore through IPO in September this year. It will spend the funds on: building a warehouse and a shed, buying new machinery, repaying bank loans, and meeting IPO costs.

The company has not been able to start using its IPO fund yet, but has declared stock dividends for shareholders.

Ring Shine Textiles Limited raised Tk150 crore from the capital market in October 2019. It will utilise the funds for the procurement and installation of machinery for its existing factory, and for partial repayment of bank loans.

The company could not start using its IPO funds due to restrictions imposed by the regulator but increased its paid-up capital declaring bonus shares in the last couple of years.

Its factory was closed due to a working capital shortage, a decline in orders from foreign buyers and a shortage of imported raw materials.

Meanwhile, Dominage Steel Building Systems Ltd got approval for an IPO fund of Tk30 crore from the regulator in August this year. It will spend the funds to construct a building and purchase electrical equipment as well as new machinery.

The company has not been listed on the stock exchange yet but declared stock dividends for the last financial year. Its IPO shares were already credited to investors' respective BO accounts last week.

Earlier, Express Insurance Limited recommended no dividend for its shareholders after being listed on the stock exchange but declared an interim dividend for them.  

Recently, the regulator sought explanations and justifications from listed companies that declared poor dividends for their shareholders.