The New Line Clothings Ltd collected Tk30 crore from the share market through initial public offerings (IPOs) promising to repay the loans of the Southeast Bank Ltd within one month.
But the company has not yet paid the loans though nearly eight months have passed.
The bank wants the low-interest loans to be paid first, whereas the company wants to pay the high-interest loans first, leading to an impasse between the two organisations.
As a result, the New Line Clothings is not paying back the loans though it can do that by withdrawing money it obtained through issuing IPOs.
Interestingly, the New Line Clothings' corporate sponsor Sigma Technologies is also a loan defaulter with the IFIC Bank. The Sigma Technologies holds 11.42 percent share of the New Line Clothings.
The Bangladesh Securities and Exchange Commission (BSEC) on November 27, 2018 gave permission to the New Line Clothings to collect Tk30 crore by releasing shares in the capital market. The face value of each share was Tk10.
The money collected from the IPOs was deposited to the company's bank account on April 4 this year. But it has not spent any money thus far as there was problem with the bank.
The prospectus of the company said new machinery would be bought for expansion of its business within six months using Tk11.76 crore from the earnings through IPOs.
It also said a factory building would be constructed within 12 months by spending Tk7.63 crore, and that Tk9 crore would be used to repay term loans of the Southeast Bank within one month of receiving the IPO fund.
M Zakir Hossain, managing director (MD) of the New Line Clothings, told The Business Standard that they cannot open letters of credit (LCs) as there is a problem with the Southeast Bank over repayment of loans.
It will take some more time to buy machinery for the company, he said, adding that the construction work of the building will start after the issue with the bank is settled.
The Banco Finance & Investment Ltd, the Sandhani Life Finance Ltd and the Southeast Bank Capital Services Ltd are issue manager of the company.
Dillydally in payment of loans
The New Line Clothings took out term loans amounting to Tk85.60 crore from the Southeast Bank's Banani branch at different times. The company announced that it would pay the bank Tk9 crore from its IPO as an instalment of the loan by May this year.
An official of the Southeast Bank's Banani branch, on condition of anonymity, told The Business Standard that the New Line Clothings took out term loans from the branch at different times, but it has not paid instalments of loans as per schedule.
As a result, the loans of the company have been classified as sub-standard, he said.
M Zakir Hossain, managing director of the New Line Clothings told The Business Standard that the loans were taken out from the bank on several terms at 12-14 percent interest rates.
The bank wants the low-interest loans to be paid first, whereas the New Line Clothings wants to pay the high-interest loans first, said Zakir.
In this regard, a consensus has been reached with the bank on Thursday, he said, adding that the bank loans will be paid soon.
Corporate sponsor of the New Line Clothings is a loan defaulter
The New Line Clothings' 79.80 lakh shares lie with its corporate sponsor Sigma Technologies Ltd. The Sigma Technologies is a loan defaulter with the IFIC Bank's principal branch. It owes Tk60 lakh – principal amount with the interest rate – to IFIC Bank.
In the current month, the IFIC Bank announced that it would sell 15 decimals of land of the Sigma Technologies at Khilgaon in Dhaka – mortgaged to the bank – to recover the loan amount.
An official of the IFIC Bank in this regard said a notice has been issued to sell the Sigma Technologies' property in auction to realise the defaulted loan.
However, following an appeal from the company, the auction has been suspended for the time being, said the bank official, adding that the company has been granted some time to pay the loans.
In this regard, the managing director of the New Line Clothings said if the corporate sponsor becomes a loan defaulter, it is a problem for the New Line Clothings as well.
Therefore, in the board meeting, the representative of the Sigma Technologies has been requested to settle the problem with the bank in the first place, Zakir Hossain added.
Ali Mostafa is in the New Line Clothings' board as a nominee director of the Sigma Technologies.
Besides, the Sigma Technologies' Managing Director Asif Rahman is also a director of the New Line Clothings. Asif Rahman holds 23.94 lakh shares of the company.
The New Line Clothings' net profit in fiscal year 2018-19 was Tk7.85 crore. In the previous fiscal, its net profit was Tk7.57 crore.
For the last fiscal year, the company gave three percent net and seven percent stock dividend to its shareholders. The company will hold its annual general meeting on December 21.
In the first quarter of the current fiscal year, the New Line Clothings' sales of goods increased by 11 percent. During the period, its net profit soared by 38 percent. In the period, the company's total sale of goods was Tk56 crore. In the previous fiscal during the same period, the sale was of Tk50 crore.
The company made a net profit of Tk3.17 crore in the first quarter of the current fiscal year which was Tk2.30 crore during the same period in the previous fiscal.
The share transaction of the New Line Clothings started on the Dhaka Stock Exchange on May 27 this year. The transaction of the company's share started at Tk19.80 on the opening day and the highest price was Tk30.
The closing rate of the company's share on the premier bourse was Tk16.10 on Thursday.