General shareholders risk to lose their entire investment
The first ever liquidation of a financial institution in up in the country’s history. The government has decided to dismantle People’s Leasing and Financial Service (PLFS) since it been insolvent for quite some times with over 60 percent of the loan portfolio non-performing.
The finance ministry recently cleared a proposal of Bangladesh Bank to liquidate the company and sell its assets to compensate the stakeholders who made deposits with the firm and also bought shares at the stock market and now facing to lose everything.
The company was cheating the depositors even in recent time luring people to invest with them at a lucrative interest which is at par with rates of national saving certificates or above and most people unaware of their insolvency made investments.
Recent media report said company staff were not available for some time in office when people would crowd and search them to draw the monthly interest at quarterly installment. Earlier reports said company sponsors had stolen over hundreds of crore taka on fictitious loan accounts and other transaction documents when its growth was impressive.
General shareholders now risks to lose their entire investment to the tune of Tk 193 crore. Institutional investors will lose Tk 25.75 crore in an estimate. The losers are not only demanding the refund of their capital but also the punishment of company sponsors who have grabbed their fund and pushed them to the brink.
Dhaka Stock Exchange (DSE) estimates suggests as of May 31, retail investors held 68 percent of the non-bank financial institution’s stock.
In the event of liquidation financial settlement would be made at first against claims of foreign depositors and then will come the turn of locals. They will be paid off once claims of institutional stakeholders being settled, knowledgeable sources said.
They get a sum if the net asset value per share is positive.But in PLFS’s case its net asset value is in the negative as of March 31.
So there is no possibility of the shareholders getting anything out of the liquidation deal. Only if the leasing company has properties whose values were shown to be lower than the market values. Shareholders can get something from proceeds selling those assets.
Each PLFS stock traded at Tk 3.6 on Tuesday from Tk 11.20 a year ago.
Reports said the PLBFI’s problems began in earnest in 2013-14, when some of its directors made off with more than Tk 1,000 crore by way of submitting fake documents, central banks inspection report said. In 2015, five directors were removed for their involvement in the financial scandal.
But it was not enough. Since then the organization was on the downward. Meanwhile it default loans and net losses were spiraling and the company at times failed to pay wages to staff.
Reports said the banks and financial institution division of the ministry of finance recently approved a proposal of Bangladesh Bank to liquidate the company upon receipt of the proposal from Bangladesh Bank.
The sources in the central bank said they have received the approval letter of the ministry of finance in this regard last month and the bank will hold discussion on the move in its next board meeting.
A special team of the Bangladesh Bank is auditing the company for the last few days, said a source.