Bepza to auction Familytex factory over unpaid rent

The Bangladesh Export Processing Zones Authority (Bepza) has announced an auction to sell the factory, building, machinery, and equipment of Familytex (BD) Limited – a publicly listed company – over unpaid rent.

The auction notice, published on 30 June, invites bids by 6 August. Bidders intending to continue operating the factory will be given preference.

According to Bepza sources, the textile mill is located on plots 47-48 inside the Chattogram Export Processing Zone. Although the factory was leased for 30 years, with the lease set to expire on 8 July 2034, Bepza has terminated the agreement early due to non-payment of rent.

Earlier, Bepza issued an auction notice on 12 December last year, but no buyers showed interest. As a result, the authority has called a second auction.

In June last year, Al-Arafah Islami Bank also announced an auction to sell Familytex's mortgaged assets to recover a defaulted loan of Tk48.86 crore.

According to bank sources, Familytex Managing Director Mohammed Morshed secured the loan in 2014 by mortgaging three plots of land and a flat in Chattogram. However, the bank has so far failed to sell the assets. A case is currently pending in the money loan court.

Familytex entered the readymade garments sector in 2003, establishing its factory in the economic zone in Chattogram.

In 2013, the company raised Tk34 crore through an initial public offering (IPO), offering shares at a face value of Tk10 each to repay high-interest loans. Banco Finance and Investment Limited acted as the issue manager for the IPO.

Familytex declared a 100% stock dividend in the first year after its listing. However, the company's performance began to decline, and it has been incurring losses since the 2016-17 fiscal year.

According to Bangladesh Securities and Exchange Commission (BSEC) sources, the company published its financial statements up to December 2020 but has not disclosed any financial results since then.

In 2021, the Dhaka Stock Exchange (DSE) formed an inspection team to assess the company's condition. The team found that both the office and factory were closed.

Subsequently, the BSEC reconstituted the company's board by appointing five independent directors to safeguard the interests of the general shareholders.

However, the new directors were unable to assume control of the company as the sponsor shareholders did not cooperate with them.

A senior officer of the BSEC, speaking anonymously, mentioned that the newly appointed independent directors resigned after their attempts to take charge failed. Following this, no shareholders with significant holdings stepped in to salvage the company.

He explained that the sponsors and directors collectively held only 4% of shares, falling far short of regulatory requirements, making it challenging to transfer control to other parties.

In 2021, the BSEC uncovered irregularities in the sale of shares by Familytex directors, who had been selling shares since 2015 without declaring. By 2017, they had disposed of 41% of their total holdings, reducing their stake from 22.43% at the end of 2018 to just 4.02% by January 2019.

During the IPO, sponsors and directors held 45.16% of shares.

Despite the managing director initially selling around two crore shares with declaration, the board subsequently sold 11 crore shares without declaration when the share price was Tk15 each.

Additionally, Korean citizen Jun Kyung Won, a sponsor, sold 4.19 crore shares in 2015, while in 2016, the chairman, Roksana Morshed, and another director, Meraj‐E‐Mostafa, collectively sold around 1.5 crore shares.

Despite these actions, the stock market regulator failed to take decisive action against the company's sponsors and directors over the years.

Efforts to reach Mohammed Morshed, managing director of Familytex, were unsuccessful, as he has reportedly absconded due to outstanding loans and involvement in a share scam, according to BSEC sources.

According to the DSE, the paid-up capital of Familytex is Tk354 crore and the number of shares is 35.41 crore. Among the shareholders, institutional investors hold 18.41% shares and the public holds 77.57%.

Its share price closed at Tk2.30 each yesterday and the market capitalisation stood at Tk81.45 crore.