How New Line Clothings keeps investors in the dark

Only three years after fundraising from the stock market in 2019, New Line Clothings, a 100% export-oriented textile firm, has become non-compliant starting from early 2022, failing to release its quarterly and annual financials, according to the Dhaka Stock Exchange (DSE) data.

As a result of the company's failure to disclose its financial reports, shareholders are left in the dark, lacking any updates about the company's performance.

Furthermore, the company failed to hold its annual general meeting (AGM) for two consecutive years, leading to its demotion into the Z category, commonly referred to as the junk category.

DSE data shows that the company consistently paid dividends for the first three fiscal years since 2019. It distributed a 12.25% cash dividend for the 2020-21 fiscal year, but since then, it has failed to pay any dividends to its shareholders.

What happened to the company

A senior company official, speaking anonymously to TBS, said, "The failure to meet loan instalments has put the company in a precarious position. With a shortage of working capital, the company's factory has been inactive for the last six months. Moreover, it has struggled to fulfil wage payments to its workers, leading to a year-long delay."

To verify the official's claim, TBS sought to reach out to the company's managing director, Zakir Chowdhury. However, attempts to contact him by phone were unsuccessful.

However, Mashiul Haq Chowdhury, a director of the company, provided contradictory information, asserting that there have been no disruptions in factory operations.

Upon being informed about the official's claim regarding the company's troubled state, Mashiul Haq replied, "As a minor shareholder of the company, I may not possess full knowledge of any operational disruptions. Our chairman and managing director are both well-informed about the company's affairs and can offer a more comprehensive explanation of the current situation."

However, Osman Khadem, chairman of New Line Clothings, declined to make any comments other than saying, "Our board has appointed Asif Rahman as the spokesperson for the company. Talk to him." 

The company spokesperson, Asif Rahman, who is also a director of the company, could not be reached over the phone, as he did not answer calls. Although a text message was sent to him through WhatsApp, he did not respond.

The company posted the last update on the Dhaka bourse on 5 October 2023, saying that it has shifted its Dhaka office to Gazipur.

Tk30cr raised through IPO

In 2019, New Line Clothings raised Tk30 crore through an initial public offering (IPO) under the fixed price method, intending to expand its business through the acquisition of machinery, loan repayment, and civil works.

According to the IPO prospectus, the fund would be used to expand the production capacity by up to 80%, which will help to grow the revenue by 15%, 18% and 11% respectively in the next three years.

Bank Asia Securities, in its equity note on the company's IPO, said New Line Clothings is a highly leveraged company. With the IPO proceeds, it aims to repay Tk9 crore of its outstanding loans. 

The company's debt ratio has been increasing over the years, reaching 96% in 2016-17 and 87% in 2015-16. The growing dependence on debt and high leverage contributes to a substantial interest burden, potentially impacting the company's bottom line, said Bank Asia Securities.

According to DSE, FY22 and FY23 have concluded, but New Line Clothings has not released any financial information. Additionally, the first half of the current FY24 has ended, yet the company has not provided any details about the share-holding directors' meeting.

In the first three-quarters of FY22, the last publication by the company, it reported a 26% growth in earnings per share, reaching Tk1.60 compared to the previous year's same period.

During the period, its net asset value was Tk24.80.

At the end of FY21, its short-term loan was Tk22 crore, and the long-term loan was Tk70 crore, as per the DSE data.

Its shares closed at Tk44.70 each at the DSE yesterday.

Out of the total shares, sponsors and directors hold a 30.61% stake in the company, where institutional investors have 18.33% and general investors have 51.06%.