The number of publicly listed companies, which were degraded to ‘Z’ category for poor performance, quadrupled last year over the previous year.
According to stock market regulators, 20 public companies listed with Dhaka Stock Exchange (DSE) were degraded to Z category in 2016 as they failed to declare dividend and hold annual general meetings and remained out of operation for over six months.
The number was only five in 2015.
Usually, the regulators degraded a company to Z category as punishment, which deters it from availing itself of margin loan.
Usually, transaction of shares of a listed company takes three days to be completed but shares of ‘Z’ category companies take nine days.
Shareholders and market insiders alleged that there are some ‘good companies’ which declare dividend for a financial year but do not for the subsequent year.
They called the tendency ‘bad’ for a smart stock market.
According to them, sometimes companies manipulate accounts and show loss that small investors has to bear.
They also said the regulatory body, Bangladesh Securities and Exchange Commission (BSEC), should look into the matter in the interest of the market and small investors.
KAM Majedur Rahman, Managing Director of DSE, admits that the degradation creates a negative impression about the stock market.
Companies declaring dividend and holding annual general meetings on time help the market remain vibrant.
The prime bourse of the country introduced ‘A’, ‘B’ and ‘Z’ categories in 2000 based on companies’ financial strength and performance. The categorisation helps investors to choose companies before making decision of share transaction.
Of the 20 degraded companies, 12, including Western Marine Shipyard, Khulna Printing, Shurwid Industries Ltd, Pragati Life Insurance, People’s Leasing, United Airways, Alltex Industries Ltd, Sinobangla Industries, the Dacca Dyeing, Bangas Ltd and Tallu Spinning, were degraded to Z category from ‘A’ category.
The rest eight -- Metro Spinning, Maksons Spinning Mills Ltd, First Finance Ltd, BD Welding Electrodes, Sunlife Insurance Company, Beach Hatchery Ltd, Deshbandhu Polymer and Legacy Footwear Ltd -- were degraded from ‘B’.category.
DSE data suggest 122 companies declared dividend last year. A total of 72 companies declared both cash and stock dividend while 26 announced only stock bonus.
In the period, 23 companies did not declare dividend.
The five companies degraded to Z category in 2015 are Progressive Life Insurance, Keya Cosmetics, Bangladesh Service Ltd, Rangpur Dairy and Food Products and Bangladesh Industrial Finance Ltd.