Dulamia Cotton declares first dividend in 16 years amid financial turnaround

Infographic: TBS

Dulamia Cotton Spinning Mills Limited has declared its first dividend in over 16 years, recommending a 3% cash payout for the 2024-25 fiscal year.

The move, announced on the Dhaka Stock Exchange (DSE) website yesterday, comes as a rare development for the company, which has been plagued by a shuttered factory, significant financial distress, and prolonged legal battles over defaulted loans. The last time the company rewarded investors was with a 2% cash dividend in FY09.

Despite its core textile operations remaining idle, Dulamia Cotton reported a modest profit of Tk19 lakh in FY25. This unexpected turnaround is not due to manufacturing but rather a combination of rental income and a one-off insurance claim.

Dulamia Cotton's Company Secretary Kazi Ekramul Hoque confirmed to The Business Standard that the decision to declare a dividend was made in light of these earnings, noting that the factory has long been idle but recent external factors are creating a more favourable environment for the owners to consider a revival.

According to the company's disclosures, a significant portion of its FY25 income came from an insurance claim of Tk37 lakh related to damages at the factory from a previous incident.

The company has secured a steady source of income through a rental arrangement. Dulamia Cotton leased a portion of its factory floor space in Feni to Chens Crop-Science Bangladesh Limited in August 2024. The agreement, effective from January 2024, covers 17,640 square feet at a rate of Tk20 per square foot, generating Tk3.52 lakh per month, in addition to Tk50,000 in monthly service and maintenance charges.

This rental arrangement, coupled with the insurance settlement, helped the company post its first profit since the first quarter of FY2011. 

Still, its financial health remains precarious, with its net asset value per share standing at a negative Tk39.83.

Dulamia Cotton's annual general meeting is scheduled for 3 December, with 23 October set as the record date.

On the market, the dividend news triggered investor enthusiasm. Dulamia Cotton's share price rose 3.08% to Tk144 on the Dhaka Stock Exchange yesterday, lifting its market capitalisation to Tk109 crore. 

Since June, the stock has surged by 121%, a rally that market insiders attribute more to speculative trading than to fundamental improvements.

Dulamia Cotton, incorporated in 1987 and listed on the DSE in 1989, is an associate organisation of the Multimode Group, promoted by Abdul Awal Mintoo. 

It began operations with Romanian spinning machines at its Feni factory. However, the company has been unable to upgrade its outdated machinery or resume production due to a longstanding loan default with Bangladesh Development Bank Limited (BDBL).

In 2013, BDBL filed a case to recover a Tk7 crore defaulted loan by selling Dulamia Cotton's assets. The company, in turn, approached the High Court to have its name removed from the Credit Information Bureau's (CIB) list of defaulters. 

In 2018, the court ruled that Dulamia Cotton should be classified as a financially distressed company, ordering it to pay 30% of the defaulted amount while instructing the bank to waive the remainder and remove the company's name from the CIB. The court also directed Dulamia Cotton to take necessary steps to comply with the terms.

Although the company engaged a firm to assess the required payments and updates, a senior official said the issue remains unresolved because of a lack of cooperation from the bank. 

"In the interest of shareholders, discussions are ongoing with the bank to settle the matter out of court," the official noted. "Interestingly, while BDBL has a representative on Dulamia Cotton's board, it does not hold any equity stake in the company."