The Bangladesh Securities and Exchange Commission (BSEC) has expressed concerns about the functioning of Zaheen Spinning Ltd as two fire incidents have thrown its business into uncertainty.
In a letter, the regulator has recently asked the 100% cotton yarn manufacturer to submit documents on its operational status and business strategy. The estimated annual production capacity of the company is 720 tonnes.
Established in 2007 at Narayanganj’s Araihazar, Zaheen Spinning was listed on the capital market in 2015. It was doing well in its cotton business even after listing on local stock exchanges. In December 2019, a devastating fire at Zaheen’s factory dealt a heavy blow to the company. Later in January 2021, the factory caught fire again.
The massive fire damaged the factory’s blow room, carding, drawing, simplex, auto cone, generator, AC plant, steel building and shed, and warehouses. After that in July 2021, the company partially resumed its production. An official of the company, seeking anonymity, said the company is trying to get its business back on track but it needs time. In December 2021, the regulator suggested the appointment of four independent directors at the company.
The company’s financial performance has been deteriorating since its listing in 2015, and in fiscal 2019-20, it incurred a loss of Tk3.39 per share. Also, the company extended its losses in fiscal 2020-21, while most of the spinning mills enjoyed improved profitability in their business due to an increase in yarn prices.
In the two loss-making years, the company did not pay any dividend to its shareholders, while its public shareholders did not get any cash dividend since the company entered the bourses. The company in its last quarterly report said due to the 2021 fire, its production was disrupted, revenue was hurt, and costs increased impacting its accounts.
Meanwhile, an external auditor in its qualified opinion in the last annual report said it found the company was violating income tax law by paying huge bills in cash. As of 31 May, sponsors and directors jointly held 31.10%, institutions 30.55%, and general investors 38.35% of the company shares.