New Ring Shine board makes roadmap to resume production

KEY TAKEAWAYS

• Company to resume operation by June-July
• Working capital support required for running the company
• May use IPO fund for working capital
• Its foreign enterprise in Bangladesh is commercially operating since 1997
• Got listed on the stock exchanges in 2019

Ring Shine Textiles' reconstituted board has prepared a one-year roadmap to resume production after the company was shut down due to Covid-19 impacts.

By March next year, the company plans to have returned to production with both short- and long-term targets.

The reconstituted board met the Bangladesh Securities and Exchange Commission (BSEC) and presented the details of the roadmap.

It sought the commission's assistance in implementing the roadmap and the permission to use the unused portion of the initial public offering (IPO) funds as working capital.

The commission told the board it will fully cooperate in this regard.

In 2019, Ring Shine Textiles raised Tk150 crore in capital by issuing IPO shares. Transactions began on 12 December that year.

However, the company closed in September last year as it faced a shortage of customers after the novel coronavirus broke out. The factory was closed for a month initially, but production could not be resumed even after the closure was extended several times.

In the interest of investors, in January this year, the BSEC reconstituted the company's board. The new board comprises: former police officials, teachers at the University of Dhaka, former bankers, and market professionals.

After taking charge, the new board inspected the factory, identified the problems and discussed them with the regulatory body.

The demand for the company's products has grown as the novel coronavirus situation has normalised a little. Foreign orders have increased as well. But the company is unable to return to production due to a working capital and raw material shortage.

Problems at the company

Ring Shine is a textile company that was started by foreign entrepreneurs. A Singapore-based business group formed the private company in 1997. Operations began the following year.

It was transformed into a public limited company in 2017 and was listed on the capital market in 2019. Its factory is in the Dhaka Export Processing Zone.

It produces 100% export-oriented products, including acrylic-based yarn, gray and finished fleece fabrics as well as dyed yarn.

According to sources on the reconstituted board, Ring Shine is a good, compliant foreign enterprise that has a standard machinery setup, a warehouse and an effluent treatment plant.

As it is facing a crisis of working capital and raw materials, it is unable to go into production though the demand for products among foreign buyers has increased. It is unable to open new letters of credit due to tax complications.

Its earnings have become almost nil as production is closed. Production is going on in one of the three units on a small scale but it is not enough to meet expenses.

That is why water, electricity and gas bills are due. The rent to be paid to the EPZ authority has also been due for eight to nine months. Titas Gas authorities have cut off two of the three gas lines at the factory because of the outstanding gas bills.

Istak Ahmed Shimul, an independent director of the reconstructed board, told The Business Standard the arrears were discussed with the authorities concerned.

He said the company will hopefully return to production shortly. 

One-year roadmap

Sources on the new board said the one-year roadmap includes short- and long-term plans.  

In the short term, the company will return to production by June-July this year. The long-term plan includes bringing continuity in production and becoming profitable.

The company will go into production on a small scale at the end of March as per buyers' short-term demands. Production will be increased later.

During this period, raw materials will be imported and working capital will be provided. Support from the regulatory agency and banks is needed to provide working capital.

At present, the company's debt stands at around Tk350 crore but it has not defaulted yet and has paid instalments. It is also considering fresh bank loans to raise working capital.

The lion's share of the capital raised through IPO was supposed to be invested in buying machinery for the new plant, but the company could not do so.

At present, Tk96 crore of the IPO funds are unused. The company will use this amount as working capital if it gets the permission of the regulatory body.

Istak said the commission has been informed of the short- and long-term plans, adding that the company will be reopened after the existing problems are resolved.

"The new board is working to ensure that none of the investors are deceived," he continued.