Union Capital heading in the same direction as People’s Leasing, BIFC
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February 07, 2023

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TUESDAY, FEBRUARY 07, 2023
Union Capital heading in the same direction as People’s Leasing, BIFC

Stocks

Ahsan Habib Tuhin
15 May, 2022, 09:25 pm
Last modified: 15 May, 2022, 10:34 pm

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Union Capital heading in the same direction as People’s Leasing, BIFC

The company’s financial report for the first quarter of this fiscal also showed no improvement in the company’s performance

Ahsan Habib Tuhin
15 May, 2022, 09:25 pm
Last modified: 15 May, 2022, 10:34 pm
Union Capital heading in the same direction as People’s Leasing, BIFC

The appointment of two independent directors to Union Capital by the securities regulator raised hope among the shareholders of the company, causing a 128% rise in its share price in July last year.   

But that could not prove enough to get the non-banking financial institution (NBFI) out of the falling streak it has been since 2019.

Actually, the financial condition of the company has deteriorated to such an extent that it is now on the brink of collapsing like People's Leasing and Financial Services, and Bangladesh Industrial Finance Company (BIFC).

And, this has affected the share price of the company. Its share price has declined by 52% since September last year and last traded at Tk7.

The picture of the company's weakening financial state has also come up in the auditor's observation in its annual report for the year 2021, which says this is the first time the company's total liabilities have exceeded its assets. Besides, the auditor raised questions about the company's future because of negative retained earnings and capital adequacy ratio, and regulatory capital (minimum capital requirement) shortfall.

The company's financial report for the first quarter of this fiscal also showed no improvement in the company's performance. In fact, it deteriorated further.

The Business Standard called the company's managing director on his mobile phone number several times for his comment on this issue, but he did not receive any of the calls.

Earlier, due to irregularities and corruption, the liabilities of FAS Finance, First Finance, Bangladesh Industrial Finance, International Leasing, and People Leasing had also exceeded their assets. Fareast Finance is currently poised to face the same fate.

Chowdhury Tanzim Karim is currently the chairman of Union Capital. He has been in this position for almost a decade. In addition, there are two directors on the company's board, who were nominated by Palmal Group of Industries.

A former official of the company, speaking on condition of anonymity, said Union Capital has fallen in today's crisis because of mismanagement, disbursals of loans in collusion with directors and sponsors, an increase in defaulted loans, and a shortage of liquidity.

He added that the company has a large investment in the stock market. But a huge amount of its margin loans got stuck as the investment portfolio turned negative following the 2010 market crash. 

And, the company is yet to recover the loss due to inefficiency and mismanagement, he noted, adding that moreover, it moved to write off the loans in violation of the rules.

Union Capital has got Tk538 crore stuck in the stock market through its subsidiary companies, while they have term deposits amounting to Tk880 crore. Besides, it owes Tk349 crore to various banks and financial institutions.

As of March this year, the company has disbursed Tk1,338 crore in loans, of which Tk110 crore has entered default. Besides, Tk477 crore was disbursed under the influence of the company's directors, according to the company's financial report.

Besides, as interest is not being collected on most of the loans given out by the financial institution, the company has been making losses for the last three years, said an official of the company. And, this is why the company could not pay any dividends to its shareholders in recent years.

Meanwhile, British American Tobacco has a fixed deposit of Tk100 crore at Union Capital. The institution could not return the fund even after its maturity. 

In this situation, British American Tobacco lodged a complaint with the Bangladesh Bank, which prompted the central bank to bar Union Capital from disbursing any loan exceeding Tk1 crore. The regulator also instructed the financial institution to return depositors' funds by recovering its loans.

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Union Capital / People’s Leasing

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