About a dozen companies have turned junk in 2013 – a trend never been seen before in the history of the country’s stock market.
Analysts say the ongoing political unrest has pushed up the production costs, eventually hitting the profitability of small-cap companies.
They warned that the list of junk companies might get longer if such political chaos continued for another two or three months.
The Dhaka Stock Exchange (DSE) has sent 10 companies to the Z-category and one to the B-category last year for poor performance.
According to the DSE rules, if a company fails to pay dividend or hold annual general meetings or is not in operation for more than six months, it is placed in the Z-category.
“For the first time, so many companies have come under the Z-category in one year,” said a DSE official. He said some companies performed poorly last year because of the political unrest, while some others had not been in operation for a long time and some were in legal tangles.
Akter H Sannamat, managing director of Union Capital, said political turmoil cut profits of some companies which was reflected in their dividend declarations.
“If political turmoil lasts long, the list of junk companies will be longer. That would be bad news for the investors as well as the economy,” he said.
The 10 companies placed in the Z-category are: Daffodil Computers Limited, Usmania Glass Sheet Factory Limited, RN Spinning Mills Limited, Gemini Sea Food, Bangladesh Autocars Limited, Modern Dyeing & Screen Printing Limited, Rahima Food Corporation Limited, CVO Petrochemical and Refinery Limited and Jute Spinning Mills.
Fine Foods BD Ltd was demoted to the B-category from the A-category as the company managed to approve only 2% stock dividend for the year ended on June 30, 2013.
Among those placed in the Z-category, RN Spinning failed to hold its AGM over the last two years because of legal tangles related to rights share issue.
Presently, companies listed with the DSE are being traded under five categories – A, B, G, N and Z.
Companies that pay 10% or more dividend and regularly hold AGMs, feature the A-category. Those who pay less than 10% dividend and hold regular AGMs are marked “B.”
The Green Field Company that is yet to start commercial operation, is placed in the ‘G’ category.
The ‘N’ category is represented by the newly listed companies.