BSEC recasts Safko Spinning board

The stock market regulator has recast the board of directors of Safko Spinning Mills and appointed a special auditor to conduct an audit of the whole affairs of the company to protect investors' interest.

The Bangladesh Securities and Exchange Commission (BSEC) has already issued a letter in this regard following investors' complaints against the company.

The stock market regulator nominated four independent directors for the company. They are SM Munir, senior advocate, Appellate Division, Mustafizur Rahman, retired army officer, Md Wali Ullah, ex-deputy managing director of Agrani Bank, and Professor Sumon Das, department of management, Dhaka University.

BSEC observes that as per the Dhaka stock exchange report, the company declared no dividend for the financial years 2018-19 and 2019-20. Since listing, the paid-up capital of the company has been increased 87.39% through the declaration of stock dividend.

The sale of the company was Tk33.18 crore according to financial reports of 2019-20 but the cost of goods sold was Tk34.56 crore, which is unrealistic, deems BSEC.

The company provided the loan for the related party, violating BSEC order.

The term loan was Tk67.79 crore for the period ended 3 June 2019, which was Tk37.54 crore in the previous year.

As a result, the company has paid an extra Tk7.59 crore in finance costs, which ultimately generated negative EPS for the company during the period.

The BSEC further observes that the company is not appropriately growing and the stockholders of the company are getting no dividend for the last two years.

The regulator deems it detrimental to the interest of the investors of the company and undesirable to the commission.

The shares held by the existing directors and sponsors will not be unblocked until further instruction from the commission.

The company shall not be allowed to sell, mortgage, pledge, transfer, and transmit without permission of the BSEC.

The commission-appointed independent directors will not have any personal financial liability.

Safko Spinning Mills, which went into commercial production in 1997, got listed on stock exchanges in 2000.

From January to March 2021, the earnings per share of the company was Tk0.05, with a loss of Tk1.85 per share.

In 2019-2020, Safko Spinning Mills incurred a loss of Tk17.05 crore, while the amount was Tk1.45 crore in the previous fiscal year.

Sponsors and directors jointly hold 30% shares while institutional shares 14.35%, and general investors' shares 55.65% of the company.

The share price of the company at DSE was Tk28.80 on Monday.