RSRM to repay debt by selling SBAC Bank stake

Highlights:

• Steel factory closed since 12 Dec 2020
• Power cut off as Tk40 crore dues in electricity bills 
• Current debt is around Tk95 crore
• Auditor said it could not arrange any fund to repay the loan
• Financial institutions filed several cases over defaulted loan
• The company Incurred Tk38 crore loss in FY21

Ratanpur Steel Re-Rolling Mills Limited (RSRM) Managing Director Maksudur Rahman will sell all his shares of South Bangla Agriculture and Commerce Bank to pay off the debt of the steel-maker and resume manufacturing, according to sources at the stock market regulator. 

The re-rolling mill has been shut since December 2020 as the power supply was cut off over Tk40 crore in dues. Besides, the company had a raw material and working capital crunch.    

MaksudurRahman, one of the sponsor directors of South Bangla Agriculture and Commerce (SBAC) Bank, holds 3.17% or 2.56 crore shares of the bank. He was the director of the bank till 2020 and lost the post subsequently due to defaulted loans. 

In a loan default case, he was arrested by RAB in June. Though he is currently on bail, he faces a travel ban slapped by a Chattogram court.

SBAC shares held by MaksudurRahman are locked-in for three years, as the bank was listed on the bourse in 2021. However, the stock regulator on 24 August gave him a conditional go-ahead in selling the bank stake.

According to sources at the Bangladesh Securities and Exchange Commission (BSEC), Maksudur Rahman will sell the bank shares to TBO Trade Limited at Tk50 crore. Though one OmorFaruk represents TBO in the purchase, details about the firm are not available.

On the Dhaka Stock Exchange (DSE) website, MaksudurRahman has already announced the sale of 2.04 crore shares of SBAC Bank. Of the shares, 1.75 crore shares were already traded on the block market of the stock exchange on Tuesday.  

According to BSEC sources, conditions on Maksudur Rahman's bank stake sale include the stipulation that he will lend the money to RSRM and its subsidiary Modern Steel as an interest-free loan. This loan could be spent on power dues, factory repairs and maintenance and raw material purchase.

The BSEC must be kept updated regularly about the spending.

According to the conditions, MaksudurRahman must declare the sale on the stock exchange and the shares will remain locked-in till August 2024 after the sale is completed.

RSRM's share price on the DSE rose by 37% to Tk23.4 in just five days on information about the sale. However, the share price fell by 2.56% to Tk22.8 on Tuesday.

The company told DSE that there is no undisclosed price sensitive information behind the abrupt rise in its share price.

Despite several attempts, The Business Standard could not reach RSRM DirectorMaksudur Rahman for comment.

The steel-maker raised Tk100 crore from the stock market in 2014. The firm issued 2.5 crore ordinary shares at a face value of Tk10 with a Tk40 premium each.

In the audit report of the 2020-21 financial year, the auditor of the company said RSRM has around Tk95 crore debt with banks and non-bank financial institutions. However, the company has no funds to pay loan installments. Besides, the company is facing a cash crunch. 

The auditor expressed concern about the company's ability to manage its business.

RSRM incurred a loss of Tk38 crore in the 2020-21 financial year, as sales that year were Tk145 crore.

But in 2014 when RSRM got listed on the bourse, its rod sales were Tk477 crore. The amount rose to Tk766 crore in the 2018 financial year, posting a record profit that year. 

From the next year, RSRM's business nosedived – pushing up defaulted loans and utility dues. It also failed to disburse the declared dividend of 10% cash for fiscal 2019-20 due to a cash crisis.

Its sponsors and directors have secretly sold shares. As a result, their holdings in the company fell from 47.03% to 29.93%. However, the DSE did not announce the share buy-sale of the company's sponsor-directors.

In March this year, BSEC formed a four-member inquiry committee to look into the financial statements of RSRM from 2017 to 2021. A BSEC official said the committee has submitted the report and the commission's Enforcement Division is now working on it.