The Bangladesh Securities and Exchange Commission (BSEC) asked Dragon Sweater and Spinning Limited to explain its decision to merge with its sister concern, Dragon Sweater BD Limited, considered 'sick' in the industry.
The commission issued a letter to the company in this regard and asked it to submit a detailed plan of the merger, board meeting minutes, company accounts, and other relevant documents, within seven working days.
The listed firm announced its decision to merge with Dragon Sweater BD earlier this month. For shareholder approval, before placing the application to the High Court, the company issued a notice regarding holding an Extraordinary General Meeting (EGM), as per company law requirement.
The EGM is scheduled to be held on 26 July and the record date is to be 30 June. Shareholders whose names appear in the company register on the record date will be entitled to attend the EGM.
Both companies are concerns of Dragon Group whose chairman was Mostafa Golam Quddus, former president of the Bangladesh Garments Manufacturers and Exporters Association (BGMEA). Currently, his son Mostafa Quamrus Sobhan runs the business of the group.
Dipak Kumar Saha, company secretary of Dragon Sweater, told The Business Standard they are working on the merger plan and that the details can be revealed after approval from the High Court.
According to BGMEA data, Dragon Sweater BD started business in 1991 while Dragon Sweater and Spinning started in 1999.
In September 2020, Dragon Sweater BD laid off about 500 workers without any pay or compensation. Workers took to the streets in front of the sweater factory in the capital's Malibagh, demanding pay and compensation. The situation calmed down after government intervention and owner assurances.
At the time, workers complained the company had been firing staff without notice because of the recession. However, the company said workers were being laid off due to factory relocation from Dhaka to Cumilla.
In 2016, Dragon Sweater and Spinning Limited raised Tk40 crore, releasing four crore shares at Tk10 for a sweater factory to be set up in Cumilla.
It raised its paid-up capital issuing 80% stock dividends since listing, but it paid only a 10% cash dividend during the years.
In the first nine months of the current fiscal year, the company's exports increased marginally to Tk113 crore compared to the July to March period of the previous fiscal year. Its profit stood at Tk20 crore.
As of 31 May 2022, sponsors and directors jointly held 32.17%, institutions 17.42%, and the general public 50.41% shares of the company.
The last trading share price of the company on the Dhaka Stock Exchange was Tk18 per share on Monday.