BSEC to Zahintex: Appoint three independent directors, oust one

The Bangladesh Securities and Exchange Commission (BSEC) has recommended Zahintex Industries appoint three new independent directors amid the performance deterioration of the knit garments manufacturer.

They are Major Abdul Quddus Mozumder, Dhaka University's Assistant Professor of Management Sarina Banu and the same university's Banking and Insurance Department's Assistant Professor Md Nazmul Hasan.

The BSEC has also asked the managing director of the listed apparel exporter to remove an existing independent director, Khatib MA Rubel, who was appointed by breaching rules.

Rubel is a relative of the company's Managing Director Khatib AZ Mukul and appointing relatives as independent directors is a violation of the Corporate Governance Code.

Contacted, Zahintex Company Secretary Liakat Ali Bakhtiar told The Business Standard he was yet to see the BSEC letter issued on Sunday.

"We have already finished our annual general meeting for fiscal 2020-21 where shareholders approved directors' appointment," he said, adding that his company would plead for time up to the next AGM to implement the suggested changes to the board of directors.

Earlier, on 5 December, the BSEC had a meeting with Zahintex representatives to discuss the reasons for the company's business deterioration.

Listed in 2011, Zahintex logged nearly Tk9.3 crore in annual profits in 2016 and since then the graph has been consistently down, and in 2019, the company entered into losing territory.

In the 2018-19 fiscal year alone, it incurred a loss of Tk18.3 crore, roughly equal to what it made in the three previous years.

And, in fiscal 2019-2020, the company with Tk81.83 crore paid-up capital lost Tk30.8 crore which slightly declined in fiscal 2020-21.

Liakat Ali Bakhtiar said winter outfits are their export products and it faced hurdles due to repeated order cancellations in recent years.

The Covid-19 pandemic only worsened the situation and at the end of the last fiscal year, the company was stuck with more than Tk163 crore in inventories.

Clearing those would help the company bounce back into profit, he added.

Zahintex shares closed at Tk7.3 each on Monday on the Dhaka Stock Exchange. In 2012, its shares had soared to above Tk57, before nosediving for a historic low of Tk2.5 in late 2019.

Zahintex Industries Ltd's net asset value per share dropped to Tk14.75 at the end of September last year.