The company cites controversial activities surrounding agreement as primary reason for deal cancellation Ring Shine Textiles has terminated a deal with Wise Star Textile Mills on selling shares to the company and its nominees.
The agreement, initially signed to transfer 38% of Ring Shine’s shares as part of a regulatory directive, has been nullified following a decision by the company’s board.
The board made the decision during a meeting on Sunday, according to a statement issued by the company.
In its statement, Ring Shine explained that the termination of the agreement was necessary to protect the interests of all stakeholders. The company cited controversial activities surrounding the agreement as the primary reason for its cancellation.
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Earlier, in August 2023, the Bangladesh Securities and Exchange Commission (BSEC) conditionally allowed Wise Star Textile Mills and five Singapore-based companies to buy Ring Shine’s 38% shares, including those held by the sponsor-directors.
Later in September of that year, the board of directors of Ring Shine expressed concerns about the credibility of the Wise Star and its associates.
A senior officer of the Ring Shine said the company’s existing board conveyed its opinion about the prospective owners to the BSEC so that Ring Shine is not held accountable if any issue arises after the takeover.
Ring Shine’s existing board found that there is no record of Wise Star’s commercial operations since its inception in 2021. Yet, it has a paid-up capital of Tk20,000 and authorised capital of Tk3 crore.
Ring Shine, on the other hand, has always been in active operations since 1998 and has a paid-up capital of Tk500 crore and authorised capital of Tk540 crore.
This massive paid-up capital difference is what made Ring Shine’s directors frown and doubt Wise Star’s financial strength to take over the operations of Ring Shine, he added.
On 22 October 2020, the BSEC froze the company’s IPO account due to non-compliance with the consent letter requirements for raising funds from the capital market by issuing shares at Tk10 each.
Ring Shine entered into the capital market raising Tk150 crore funds for business expansion issuing shares in 2019. Amid the pandemic, it ran into trouble as its export orders from foreign buyers significantly fell.
During an inspection, the BSEC discovered that the company had issued shares to 11 sponsor directors and 33 pre-IPO private placement shareholders without receiving any payment from them. The commission also revealed that at least Tk52 crore remained unpaid by the pre-IPO shareholders.
The then commission, led by Professor Shibli Rubayat Ul Islam, had allowed some owners of another listed firm to take over the textile company, though the takeover ultimately did not occur.
Recently, following the government change in August this year, the main owners have returned to the company.
Earlier, Auniruddho Piaal, managing director of Ring Shine Textiles, told TBS, “Since resuming operations after a partial disruption in recent years, the company has seen a significant increase in production. Demand from our foreign customers is growing rapidly.”
He said, “Given this surge in demand, we plan to utilise the frozen IPO funds, with shareholder approval, for the company’s operations in the best interest of our shareholders.”
Piaal further said, “We have already requested permission from the BSEC to unfreeze at least Tk10 crore from the IPO account to settle outstanding dues with Bepza (Bangladesh Export Processing Zones Authority). After receiving shareholders’ approval at the upcoming AGM, we will apply to the commission again to unfreeze the remaining funds for purchasing machinery.”
Meanwhile, Ring Shine reported a 43% drop in revenue, falling to Tk157 crore in FY24 compared to the previous year. During the same period, the company posted a net loss of Tk153 crore.
Ring Shine has been incurring losses since FY20, resulting in its retained earnings reaching a negative Tk902 crore. Additionally, the company has failed to pay any dividends since FY19.