Despite incurring losses for years and with little hope for a turnaround, the share prices of the debt-ridden Zeal Bangla Sugar Mills have been rising due to "unknown" reasons.
According to the Dhaka Stock Exchange (DSE), the share price of the state-run company has rocketed by almost 50% in the last three months.
The price has increased from Tk115 in January this year to Tk161 per share at present.
Market insiders see the rise in share prices as unusual when there are fears about the future of the company.
Zeal Bangla is the second-highest loss-making company in the capital market in terms of earnings per share (EPS).
In fiscal 2020-21, it incurred a loss of Tk116 per share, which is about 24% more than the previous year.
And according to EPS, the biggest loss-making company in the capital market is Shyampur Sugar Mills, around state-run sugar manufacturer, whose production has now stopped. In fiscal 2020-21, its loss per share stood at Tk125.
The auditor of the company said, "The net asset value and retained earnings are negative, and it has not been able to generate profit for a few years. It also has not generated operating revenue in the past few years."
Zeal Bangla Sugar Mills will incur huge losses in the current financial year too.
An official of the mill said that sugarcane was not available as expected. Sugarcane production has decreased and the cost has increased. This time too less sugar will be produced than the target. As a result, the mill will not be able to get out of the loss circle.
Md Rabbik Hassan, managing director of Zeal Bangla Sugar Mills, told The Business Standard, "Sugarcane threshing has been completed for the current financial year. The mill was open for 42-43 days. At this point, all the sugarcane threshing is over. "
"There was uncertainty as to whether sugarcane would be threshed this time. This time the production is likely to decrease a little, but next year the sugarcane production will increase. This time sugarcane has been cultivated on more lands," he added.
According to the financial statements, Zeal Bangla produced 3,908 tonnes of sugar in fiscal 2020-21.
Why Zeal Bangla shares keep surging
Despite incurring losses for years, the shares of Zeal Bangla suddenly found good days. There was no improvement in the financial situation of the company, no plan for its transition but suddenly its share price started rising.
As has been the case since the publication of the half-yearly financial statements for fiscal 2021-22. At the end of the July-December period, each Zeal Bangla share was Tk116.
The financial statements for the second quarter were released on 27 January which shows the company's net loss for the half-year was Tk22.25 crore.
After that, the share price was down for a few days but started rising on 7 February. The price rose from Tk113 per share to Tk157 in just six days. On 6 April, the price rose to Tk161.
A top official at a brokerage house, who did not want to be named, said it was mainly "a manipulation by a cycle".
"Sick and loss-making companies are the first to spread rumours – they buy shares themselves and raise prices. After hearing rumours, ordinary investors bought shares and the cycle comes out of the investment after the price went up," he added.
Accumulated loss mounts to Tk505.71cr
The accumulated loss of the sugar manufacturer stood at Tk505.71 crore, from Tk436.12 crore a year ago.
In fiscal 2020-21, the mill incurred a loss of Tk69 crore, which is a 24% increase from the previous year.
It has earned about Tk33.09 crore from the sale of 4,000 tonnes of sugar and other sectors, which is about 10% more than the previous year.
Arifur Rahman Apu, chairman of the Bangladesh Sugar and Food Industries Corporation, said in Zeal Bangla's annual report, "Despite adversities, Zeal Bangla has continued to produce sugar with the help of the government."
"Losses are increasing as the selling price is lower than the production cost of sugar. The distribution of materials under the loan and the steps taken to use improved seeds will increase the production of sugarcane and sugar so that the cost will come down," he added.
Md Rabbik Hassan said, "On the one hand, production is low, but the cost is high, which is why there is no profit. There are large loans with state-owned Sonali and Janata banks."
"The total loan amount of the banks and the sugar food industry corporation is about Tk4.5. If it is calculated with the loan, the cost of sugar production is higher but the selling price of sugar in the market is lower," he added.