The share price of Sea Pearl Beach Resort and Spa Ltd has soared 70% in the last six weeks, riding on hopes for its interest waiver by the state-owned Investment Corporation of Bangladesh (ICB).
The stock price of the owner company of Cox's Bazar's luxury hotel Royal Tulip closed at Tk77.7 per share on Monday on the Dhaka Stock Exchange (DSE), which was below Tk46 at the end of July.
Sea Pearl Beach Resort Managing Director Aminul Hoque could not be reached over the phone for comment, while his company secretary declined to comment.
ICB Managing Director Abul Hossain told The Business Standard that it would place an interest waiver proposal for Sea Pearl in its upcoming board meeting that would help strengthen the struggling service sector company's books.
Replying to a question on how much of the nearly Tk100 crore interest to be waived, the ICB managing director said it was yet to be finalised and his team was still working on the figures.
Following court instructions for a constructive solution, ICB had placed the interest waiver proposal to its board previously, but the board was waiting for the finance ministry's consent.
Finally, the finance ministry left the matter to the ICB board, subject to compliance with relevant guidelines.
"We cannot waive the entire interest amount as we have the cost of our funds," Hossain said.
He said Sea Pearl owes more than Tk400 crore to ICB against its Tk325 crore bonds issued in October 2017, fully subscribed by the ICB. Following a 2-year moratorium, the company was set to begin semi-annual repayments from April 2020.
But citing the pandemic that drastically reduced its hotel business capacity utilisation then, the company refrained from paying any sum to ICB and kept applying for waivers.
The listed company also went to court to protect itself from being a defaulter, it presented the pandemic as the evil behind the decline in its business and non-payments to ICB.
Auditor's concern about the company
Kazi Zahir Khan and Co, Chartered Accountants, the statutory auditor of Sea Pearl, in the fiscal 2020-21 report expressed its concern regarding the company's financial weakening amid declined revenues against a high debt burden that was creating a material uncertainty regarding the company's ability to continue as a going concern.
However, since the pandemic eased in the middle of 2021, the company managed to increase its revenue to over Tk76 crore for the first nine months of the fiscal 2021-22, which was less than Tk65 crore and Tk46 crore in the previous two fiscal years disrupted by the pandemic.
Its net profits for the first nine months of the fiscal 2021-22 also soared to Tk12.96 crore, much higher than that in previous years, while the fiscal 2019-20 was a losing year for the company.
According to the third quarterly statement of the fiscal 2021-22, Sea Pearl's total non-current liabilities stood at Tk402.6 crore while the non-current liabilities in the bonds sold to ICB were over Tk391 crore. On the other hand, of the Tk110 crore current liabilities, over Tk98 crore was the current portion of the bonds.
In November last year, the company started a new business of cruise ship tour packages on the Khulna-Sundarban-Khulna route following its Tk8.5 crore investments in buying two cruise ships.
Sea Pearl carries out its core business through a franchise agreement, signed on 1 June 2014, with Netherlands-based five-star hotel and resort operator GT Investments BV. They are running the hotel and resort business under the "Royal Tulip" brand. It started its commercial operations in September 2015.
The company started constructing the hotel in Cox's Bazar with a bank loan. Later, they issued a bond worth Tk325 crore with an interest rate of 10% mainly for repaying the loan. The secured bond was issued for eight years with a convertibility option for 20% of the total units.
Later, the company raised Tk15 crore through an initial public offering in 2019.