Mozaffar Hossain Spinning to allow associate company to mortgage assets for loans

Mozaffar Hossain Spinning wants to provide an associate company with an opportunity to mortgage its assets for availing loans and for this the spinning mill will add a new clause to the Memorandum of Association.

The listed company will now require approval from its shareholders.

For this, it will hold an extraordinary general meeting (EGM) on 5 March. It has set 9 February as the record date for the EGM.

The company had earlier sought approval from the High Court in accordance with the Companies Act to add a new clause to the Memorandum of Association.

Mozaffar Hossain Spinning Mills Limited is a concern of SIM Group. Under this group, there are five more companies that will be able to use the assets of the spinning mill as a mortgage for loans.

According to the company's financial statement, its total asset value stood at Tk546.69 crore at the end of 30 September 2021.

This correspondent called its Managing Director Mozaffar Hossain and Company Secretary Haris Alam for comments but they did not pick up their phones.

Stock market analysts say there is a practice among the country's business groups of mortgaging the assets of a company to avail loans for its associate companies.  

Since Mozaffar Hossain Spinning is a listed company, here public shareholders are involved and the matter is risky. Therefore, in giving this kind of opportunity, the business condition of the associate company has to be considered.

Meanwhile, Mozaffar Hossain Spinning disclosed its financial statement for the first half of fiscal 2021-2022 on the Dhaka Stock Exchange (DSE) website on Wednesday.

According to the statement, its earnings per share (EPS) jumped 23 times to Tk0.73 in the October-December quarter.

At the end of the first half, the EPS stood at Tk0.97, which was Tk0.39 negative a year ago.

It said the effect of production and sales from the new ring spinning unit and full capacity utilisation at rotor unit, as well as the current price hike of yarn, helped the company report such a jump.

Earlier, in 2018 the invested around Tk250 crore to boost its production capacity, creating jobs for 900 workers and officials.

According to sources, the company's current annual production capacity is about 13,000 tonnes, which was 5,500 tonnes earlier.

Meanwhile, the company's share price started rising from 26 December. Till 18 January, its share price had soared 33%. However, the share price fell 2.22% on the day of the release of EPS data.

Its share closed at Tk30.80 at the DSE on Wednesday.