Tung Hai Knitting sinks in 3 years after stock listing

Tung Hai Knitting & Dyeing Ltd was listed on the stock market of Bangladesh in 2014 as it raised Tk 35 crore. But the knitting manufacturer became a sick company within three years, raising questions about its intention of going public.

From the financial year of 2016-17 to 2020-21, the knitting company incurred a combined loss of Tk 189 crore.

"It drowned due to a corrupt and treacherous syndicate that sprang up within the company," said the company's auditor. The Dhaka Stock Exchange (DSE) published the audit report on its website yesterday.

But before the listing, the company had been making profit at least since 2009, according to the IPO prospectus of the company.

The company's course reversed for the worse after just two years of the listing, raising questions about the intention of the issuer as well, said a merchant banker, adding that the issuer should not bring any company to the market whose future is uncertain.

Now, many general stock investors are suffering losses for holding the company's shares, the merchant banker added. Tung Hai shares were last traded at Tk 5.90 on the DSE.

The number of shares of the company available for trading on the premier bourse is 10.66 crore, with 63.04 per cent being held by general investors and 30.04 per cent by sponsor-directors, according to the data of the DSE.

Tung Hai Knitting went downwards in 2016-17.

There were also troubles including workers' insubordination, according to the audit report.

About the same time, the local garments industry as a whole began to suffer because of the global recession. As a result, orders were few and far between, and many orders were cancelled, it said.

"With a hostile environment within the company, directors became tired and gave up, the CEO resigned, productions stopped, and the company was grinding to a halt by September 2017. And ultimately, the factory was closed sine die."

No annual general meeting has been held since 2017. And necessary documents and papers related to production, stock, expenses and physical inventory could not be furnished with the auditor, except bank statements.

"The condition, along with other matters, indicates that material uncertainty exists that may cast significant doubt on the company's ability to continue," said the audit report.

Tung Hai Knitting incurred a net loss of Tk 3 crore, Tk 19.9 crore, Tk 33.2 crore, Tk 92.9 crore, and Tk 40 crore respectively in the five financial years to 2020-21.

Incorporated in 2004, Tung Hai Knitting was a 100 per cent deemed exporter, mainly engaged in the business of dyeing and knitting and bleaching of yarn used in making export-oriented sweaters and garments.

The Bangladesh Securities and Exchange Commission has frozen the bank accounts of the company and its directors to protect the interest of general investors. It fined the directors in November 2020 for the violation of securities laws.