HR Textile plunges 10% after category downgrade to Z
Investor reaction was swift and severe. The stock hit its circuit breaker lower limit, shedding 10% to close at Tk30.60 per share yesterday. The fall erased gains made in the previous two weeks, when the stock had surged by 25% between 21 August and 2 September on speculative buying.
Shares of HR Textile Ltd, a concern of Pride Group, nosedived by 10% today (3 September) after the company was downgraded to the "Z" category from its previous "B" status by the Dhaka Stock Exchange (DSE).
The reclassification came into effect yesterday, following a regulatory directive.
The downgrade was triggered under provision of the Bangladesh Securities and Exchange Commission (BSEC) directive, which applies when a company's accumulated loss or negative retained earnings—after adjusting revenue reserves—exceed its paid-up capital. As a result, stockbrokers and merchant bankers have also been barred from providing margin loan facilities to investors for trading HR Textile shares.
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Investor reaction was swift and severe. The stock hit its circuit breaker lower limit, shedding 10% to close at Tk30.60 per share yesterday. The fall erased gains made in the previous two weeks, when the stock had surged by 25% between 21 August and 2 September on speculative buying.
The downgrade and the market's reaction highlight the growing concerns over the company's financial viability, as mounting losses and operational challenges continue to erode investor confidence in one of the country's long-standing export-oriented firms, according to the market insiders.
According to the company's financials, HR Textile is grappling with deepening losses. In the first nine months of FY25, it reported a Tk53.93 crore loss, with loss per share standing at Tk18.46.
Its retained earnings were Tk89.29 crore in the negative during the period. The company's net asset value (NAV) per share shrank to Tk2.98 as of 31 March 2025, down sharply from Tk21.43 just nine months earlier.
The troubles are not new. For FY24, HR Textile incurred a record loss of Tk57 crore, or Tk19.67 per share, and skipped dividend payments to shareholders.
Its auditor, SK Barua & Co, flagged significant concerns in the audit report, pointing to negative cash flows, excessive liabilities, and a challenging operating environment marked by labor unrest, gas shortages, and order cancellations.
HR Textile, which has been listed on the DSE since 1997, is a 100% export-oriented manufacturer engaged in knitting, dyeing, finishing, and garments production. It has a paid-up capital of Tk29.22 crore. As of July, sponsors and directors held 34.54% of the shares, institutional investors owned 13.48%, and general shareholders accounted for the remaining 51.98%.
