A number of companies that strategically raised vast sums from the stock market now find themselves on the brink of collapse, failing to deliver dividends and sinking to the lowest market categories.
These firms, once celebrated for their ambitious public offerings, have become a cautionary tale of financial mismanagement and questionable regulatory oversight.
In the past seven years, 56 companies have been listed on the stock market, collectively raising Tk5,178 crore.
Of these, 24 companies have since slipped into the "Z" and "B" categories, having amassed over Tk2,000 crore from investors, yet showing no signs of financial improvement.
Ring Shine Textile Limited, which raised Tk150 crore in 2019 for business expansion, is now facing an existential crisis.
Associate Oxygen, which secured Tk15 crore in 2020 with ambitions of becoming an internationally recognised entity, has failed to provide dividends and has been relegated to the "Z" category.
Market analysts highlight a disturbing trend: A company seeking stock market listing is required to demonstrate three consecutive years of profit.
The expectation is that firms raise capital to expand and strengthen operations.
However, in many cases, the opposite has occurred. Industry experts allege that underperforming firms, in collusion with regulatory authorities, have manipulated financial reports to secure IPO approvals and subsequently siphoned off funds.
During the tenure of the previous government, influential individuals allegedly exploited their power to establish companies or use third parties to do so, raising funds under false pretences.
These companies, backed by fabricated financial reports, withdrew substantial amounts from the stock market, exacerbating the current crisis.
Sonali Life Insurance Company Limited, which operated for 11 years before securing regulatory approval in 2021, raised Tk19 crore from the stock market.
At the time of its listing, each share attracted applications from 37 investors.
However, by 2024, the company had plummeted to the "Z" category, leaving investors in dismay.
In 2019 alone, nine companies went public through IPOs, collectively raising Tk640 crore.
Of these, six have now fallen into the "Z" category, having absorbed over Tk500 crore.
Alarmingly, two of these firms have since ceased operations entirely.
Recently, IDRA Chairman Dr Aslam Alam remarked that certain insurance firms approved in 2013 and 2014 had no intention of sustaining viable businesses but rather sought to exploit the stock market for financial gains.
He further revealed that legal action is being pursued against such firms for misappropriating client funds.
New Line Clothing Limited, a textile company, was listed in 2019 after raising Tk30 crore.
At the time of its listing, each share attracted 28 investors.
Now, the company languishes in the "Z" category and has failed to release financial reports since 2021.
Intraco Refuelling Station Limited secured Tk30 crore in 2021 but reduced dividend payouts within three years, offering a mere 1% cash dividend by 2024.
Lub-rref (Bangladesh) Limited, which raised Tk150 crore from the stock market in 2021, has been posting consistent losses since its listing and is now in the "Z" category.
Companies are categorised based on financial performance: Those issuing dividends exceeding 10% fall into the "A" category, those providing dividends between 5% and 10% are placed in the "B" category, while those failing to release financial reports or pay dividends are designated "Z" companies.
Economist Abu Ahmed attributes the crisis to two primary factors: The deliberate manipulation of financial reports and inadequate oversight by the Bangladesh Securities and Exchange Commission (BSEC).
He observed, “Most listed companies present misleading financial statements, deceiving investors. Those engaged in market manipulation must face stringent legal consequences.”
Debabrata Kumar Sarkar, former chief research officer at BRAC EPL Investment Limited, noted that nearly 70% of funds raised from the stock market are utilised for repaying bank loans rather than improving production capacities.
“This practice must cease,” he stated.
Sarkar further highlighted the paradox in stock market trends: “A company must show three years of consecutive profits to get listed, yet many of them collapse or halt dividend payments soon after raising capital. It is imperative that firms guilty of such misconduct face punitive action.”
A senior executive director at BSEC, speaking anonymously, admitted that the commission had approved these firms under previous leaderships. While BSEC has the legal authority to dissolve the boards of underperforming companies, past efforts to restructure them have yielded little progress.
He assured that the current commission is exercising greater vigilance in approving new listings and is actively pursuing legal measures against firms found to have manipulated their way onto the stock market.
