BSEC to review RN spinning’s post-fire financial statements

The Bangladesh Securities and Exchange Commission (BSEC) has decided to review the financial statements of RN Spinning Mills Limited to scrutinise the impact of a fire accident in FY19 on the company’s financial performance and ensure the transparency of the reported losses.

The commission has decided to appoint a special auditor in this regard as part of its regulatory role to protect investors and maintain market integrity.

An official of the BSEC, speaking on condition of anonymity, told TBS that RN Spinning Mills Limited reported a significant loss due to a fire incident in its financial statements for FY19.

The commission aims to ascertain the exact impact of the fire on the company’s finances. Specifically, the BSEC wants to determine the actual extent of the losses caused by the fire and verify the accuracy and truthfulness of the financial statements presented by the company for that period, he added.

Low return from the firm

Market insiders say the investors are suffering for not getting the expected return since listing, as the company did not pay any cash dividend to its investors. They noted that two other companies in the group, also listed on the capital market, have not generated good returns for the investors.

There are allegations that Abdul Kader Faruk, the group chairman, was involved in placement tricks with Ring Shine Textile.

Ring Shine raised its paid-up capital from Tk9.95 crore to Tk285.05 crore by issuing pre-IPO, known as placement shares, to existing sponsors, directors, and 73 external local shareholders.

Of these, however, 11 sponsors and directors and 33 external shareholders did not make any payment against their allotted shares, according to findings by the market regulator.

RN Spinning-Samin Food merger

According to the Dhaka Stock Exchange (DSE), RN Spinning has incurred losses since FY19, as its operations fully ceased in 2019 due to a fire incident at Cumilla EPZ. In January last year, the High Court approved a merger between publicly listed RN Spinning Mills and non-listed Samin Food & Beverage Industries and Textile Mills.

In October last year, the BSEC also approved this merger following the High Court’s approval. After the merger, RN Spinning’s existing shareholders received shares at a 1:5.59 ratio, meaning they got one new share of post-merger RN Spinning against the 5.59 shares held in the company before the merger.

The share price of the post-merger RN Spinning plunged 45% from its adjusted price to Tk12.70 on Sunday. The company stated that it achieved remarkable progress in operations following the merger with non-listed firms owned by the same group, facilitating its comeback.

Md Humayun Kabir, director of marketing at FAR Group, said earlier, “RN Spinning’s operation has been closed for around five years due to a fire incident. Investors also did not get anything during the period. We try to change this situation for the better. After the merger, we have been able to get back into business properly. We hope investors will get better returns from now on.”

In the July-March period of the last fiscal year, RN Spinning posted revenue of Tk280.65 crore, compared to Tk272.89 crore a year ago. Its profit after tax stood at Tk2.74 crore and earnings per share stood at Tk0.09.