Fareast Finance deprives shareholders of dividends for fourth straight year

Poorly performing Fareast Finance & Investment Limited - a publicly listed non-bank financial institution (NBFI) - did not recommend any dividends for the fourth consecutive year that ended on 31 December, 2020.

According to the company's filing on the Dhaka Stock Exchange (DSE) website on Monday, it incurred losses in 2020 owing to a significant increase in its classified loans.

Last year, the NBFI restructured its board to improve its business standing.

The company's accounts for 2021 are still pending because of several anomalies found by the new board that are yet to be resolved, according to company sources.

Fareast Finance shares are being traded in the 'Z' category of the DSE because of its failure to pay dividends since 2017. It last paid only a 6% cash dividend in 2016.

Its share price is stuck at the floor which was set by the Bangladesh Securities and Exchange Commission (BSEC) in July this year as a mechanism to arrest a stock market freefall.

At the end of Monday's trading session, the price of its shares was Tk6.40 each on the DSE, against a face-value of Tk10.

To approve audited accounts and other matters from its shareholders, the company has set the annual general meeting on 29 September, and the record date on 11 September.

Financials

According to the company's price-sensitive information, its loss per share stood at Tk1.74 in 2020, which was Tk4.38 in 2019.

Its net asset value (NAV) per share decreased to Tk1.11 from Tk2.85 in 2019 because of increased liabilities and some written-off loans, according to sources.

According to Bangladesh Bank data, classified loans of Fareast Finance increased to 89.95% of total disbursement in 2021, from 51.9% in 2020.

At the end of the 2021, its total classified loans stood at Tk871.7 crore.

Board reformation

In 2013, Fareast Finance raised Tk45 crore from the capital markets with an initial public offering (IPO).

Back then, the company had MA Khaleque as its chairman – who was controversial for many wrongdoings regarding the disbursement of loans during his time on the company's board.

In March 2020, the Anti-Corruption Commission (ACC) barred Khaleque from leaving the country.

Khaleque held key posts at a variety of enterprises. He is a former vice-chairman of Prime Bank Ltd, former director of Fareast Islami Life Insurance, former chairman of Prime Islami Insurance, and trustee board chairman of Primeasia University.

The Anti Corruption Commission or ACC, has an ongoing investigation against Khaleque on charges of embezzling money from Prime Asia Foundation, Prime Islami Securities, People's Leasing, and other institutions.

In 2018, M Shamsul Islam Varosha, owner of Varosha Match, took up the chairmanship of Fareast Finance to bring it back to business. But the new board has also failed to establish corporate governance in the company.

Then in 2021, the BSEC restructured the company's board to protect its minor investors by appointing six independent directors.

The BSEC also directed the new board to arrange a special audit to determine transgressions of the previous board.

At present, sponsors and directors jointly hold 39.74%, institutional investors 17.02%, and general investors 43.24% shares of Fareast Finance.