Ring Shine to seek shareholder nod to deploy frozen IPO funds

More than four years after its initial public offering (IPO) funds were frozen by the securities regulator, Ring Shine Textiles, a listed company on the capital market, is now seeking shareholder approval to utilise the funds for business operations. 

The company also plans to extend the period for utilizing the unused funds by one more year and amend the allocation of IPO proceeds at the annual general meeting (AGM) scheduled for December 12, according to company officials.

With shareholder approval, the company will request the Bangladesh Securities and Exchange Commission (BSEC) to use the funds. 

As of June 2024, the frozen funds amounted to Tk34.80 crore, along with the company earning over Tk5 crore in interest, according to its annual report for the fiscal year 2023-24.

On 22 October 2020, the Bangladesh Securities and Exchange Commission (BSEC) froze the company's IPO account due to non-compliance with the consent letter requirements for raising funds from the capital market by issuing shares at Tk10 each.

Ring Shine entered into the capital market raising Tk150 crore funds for business expansion issuing shares in 2019. Amid the pandemic, it ran into trouble as its export orders from foreign buyers significantly fell.

During an inspection, the BSEC discovered that the company had issued shares to 11 sponsor directors and 33 pre-IPO private placement shareholders without receiving any payment from them. The commission also revealed that at least Tk52 crore remained unpaid by the pre-IPO shareholders. 

The then commission, led by Professor Shibli Rubayat-Ul Islam, had allowed some owners of another listed firm to take over the textile company, though this takeover ultimately did not occur. 

Recently, following the government change in August this year, the main owners have returned to the company.

Auniruddho Piaal, managing director of Ring Shine Textiles, told TBS, "Since resuming operations after a partial disruption in recent years, the company has seen a significant increase in production. Demand from our foreign customers is growing rapidly."

He said, "Given this surge in demand, we plan to utilise the frozen IPO funds, with shareholder approval, for the company's operations in the best interest of our shareholders."

Piaal further said, "We have already requested permission from the BSEC to unfreeze at least Tk10 crore from the IPO account to settle outstanding dues with BEPZA. After receiving shareholders' approval at the upcoming AGM, we will apply to the commission again to unfreeze the remaining funds for purchasing machinery."

Enquiry committee formed

Meanwhile, on 19 November, the BSEC formed an inspection committee to examine the premises of Ring Shine's factory, its head offices, books of accounts, records, and other relevant documents. 

The three-member committee was tasked with submitting a report within 30 working days, according to a BSEC order, seen by TBS.

The committee will assess the utilisation of IPO proceeds in accordance with the consent letter and prospectus, identify the transactional parties, evaluate the cash flow of transactions and the fairness of those investments, and verify bank transactions and other related issues, according to the BSEC order.

Ring Shine's dues to BEPZA

Ring Shine Textiles has failed to pay its dues to the Bangladesh Export Processing Zones Authority (BEPZA). In late October, BEPZA issued a letter to the company, demanding the repayment of outstanding dues within 21 days, by 4 November.

The letter further stated that if Ring Shine does not meet this deadline, BEPZA will take necessary actions as outlined in the terms and conditions of the land lease agreement.

According to Ring Shine's MD Auniruddho Piaal, the outstanding dues amount to $1.19 crore, or approximately Tk130 crore. However, the amount will be paid in instalments.

IPO utilisation

In its prospectus, Ring Shine outlined plans to allocate funds from the IPO for various purposes, including the acquisition of machinery and equipment for its denim project (Tk96.40 crore), loan repayment (Tk50 crore), and IPO expenses (Tk3.60 crore).

According to the agenda for the upcoming Annual General Meeting (AGM), the IPO funds were supposed to be fully utilised by 5 May 2021, as per the prospectus. 

Unfortunately, the company was only able to use the funds for repaying the bank loan and covering IPO expenses, with the remaining funds unutilised for other planned investments. 

Subsequently, the BSEC froze these unutilised funds The company has now discarded its declared Denim Project amid the lack of funds.