BSEC worried about Oimex’s new owners

The stock market regulator is concerned about the future of Oimex Electrode Ltd, which has been acquired by Bangladeshi entrepreneur Javed Opgenhaffen and his family.

The Bangladesh Securities and Exchange Commission (BSEC) is worried because two other listed companies – SS Steel and Fu-Wang Ceramic Industry – owned by Oimex's new owners, are also facing audit objections for different anomalies.

According to BSEC officials, it also suspects that money was embezzled in the company during the previous management.

The commission also believes that the previous owners could not operate the company properly. And its financial performance had been on the decline since its stock market listing five years ago. As a result, the general investors did not get the expected returns over the years, they added.

Amid this condition, the BSEC will investigate the financials and overall business of Oimex Electrode Ltd. The market regulator has already formed a three-member inquiry committee to this end.

Headed by BSEC Additional Director Md Iqbal Hossain, Deputy Director Md Shahnows and Assistant Director Binoy Das are the members of the committee.

Javed Opgenhaffen told The Business Standard, "We have recently taken over the company. The commission has formed the committee to look into whether there were anomalies during the previous management."

"Now we are trying to improve the business of the company. We have already made a large investment that will have a positive impact on the market," he added.

Regarding the audit objections against his two other companies, Javed said, "It was in the previous audit reports. However, we have made enough progress in our two companies' operations, which will be reflected in the most recent audit reports."

The BSEC allowed the takeover of Oimex Electrode Ltd with a dozen conditions.

According to the conditions, both sellers and buyers will make appropriate declarations through the stock exchange.

The new owners will nominate directors to the board of the company after transferring 30.01% of shares to the stipulated firms.

The new board will invest at least Tk6 crore as a loan or share money deposit and Tk10 crore as a working capital loan, respectively, to run the operations smoothly and profitably as per their business plan.

To reduce the interest burden, the proposed shareholders will assume any other liabilities, including a bank liability of Tk23 crore.

Oimex Electrode is a manufacturer of welding electrodes, galvanised iron wire, copper-coated welding wire, and iron nails.

According to sources, Oimex Founder MA Maleque, who headed the company's factory operations, found it better to exit, considering the company's poor management and marketing.

Sources also said Maleque, father to a young daughter, was not confident about his succession.

Meanwhile, SS Steel owners, already in the metal business, found the Oimex factory efficient enough to manufacture quality products at a minimum cost.

They also plan to make further investments in the business, over and above the cost of the acquisition at face value and to regularise the company's bank loans.

Oimex Electrode has a head office in Dhaka and a factory in Kushtia. It went public for Tk15 crore in 2017 by issuing shares at a face value of Tk10 each.

The company used the funds to expand its manufacturing and research and development capacities.

But its marketing and management did not get any better, as its main market has been mostly limited to the northern and southwestern parts of the country.

Its revenues and net profits showed upward movement until 2019, but after that, they started to decline.

The company has not declared any cash dividends since its listing.

A Dhaka Stock Exchange (DSE) inspection report in January 2021 revealed the company was overstating its revenues and assets, while its managing director admitted to DSE officials that his company was lacking in proper maintenance of documents.

However, the company's statutory auditor, Artisan Chartered Accountants, did not raise any point in this regard, which was a violation of auditing standards, the DSE said in its report to the BSEC back then.

From January to March 2022, the company's revenues stood at Tk26 lakh, which was Tk12.22 crore in the same quarter of 2021.

During the period, it incurred a net loss of Tk2.70 crore and its loss per share stood at Tk0.40.

Oimex Electrode's paid-up capital is over Tk67.08 crore now, while institutional investors hold 30.23%, and general investors 39.76% of the company's shares.

The last trading share price of the company on the Dhaka stock exchange was Tk18.60 on Thursday.