General shareholders may lose Tk 193cr

The general shareholders of People’s Leasing and Financial Service (PLFS) that is staring at liquidation are likely to lose their entire amount, further raising the stakes for the government to penalise those responsible for driving the company into the ground.

As of May 31, retail investors held 68 percent of the non-bank financial institution’s stock, according to the Dhaka Stock Exchange.

If the liquidation goes through -- which will be a first in Bangladesh’s financial sector -- the general shareholders stand to lose about Tk 193.52 crore and institutional investors Tk 25.75 crore.

In the event of liquidation external creditors are paid off first and then the depositors, debenture holders and preferential shareholders in that sequence, according to Mohammad Mohiuddin Ahmed, executive director of Financial Reports Monitoring Division at Financial Reporting Council.

The general shareholders’ turn comes in the end, once all parties have been paid off. They get a sum if the net asset value per share is positive.

But in PLFS’s case its net asset value or NAV is Tk 67.66 in the negative as of March 31.

“There is no possibility of the shareholders getting anything as PLFS’s NAV per share is so negative,” Ahmed said.

Only if the leasing company has properties whose values were shown to be lower than the market values can the shareholders get something.

“But the possi-bility is very low,” he added.

Dawned with the possibility, retail investors of the PLFS yesterday tried to dump their shares but in vain.

Zahid Hasan, one of the retail investors, told The Daily Star yesterday that the leasing company could have gone into liquidation much earlier.

On September 30 last year the NAV per share was Tk 10.20, according to the DSE.

“Then the depositors and stock investors could have gotten some money,” he added.

Each PLFS stock traded at Tk 3.6 yesterday, down from Tk 11.20 a year ago.

The NBFI’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, according to a central bank inspection report.

In 2015, the central bank had removed five directors for their involvement in the financial scandal.

But it was not enough. Since then the bank has been on a downward spiral.

For instance, in the first nine months of last year PLFS’s operating expenses stood at Tk 22.48 crore against the operating income of Tk 2.05 crore.

The PLFS sometimes failed to pay the wages to its employees because of the severe liquidity crunch, some officials informed The Daily Star.

The NBFI has failed to repay the depositors’ money despite maturity of the funds, found the central bank report. Default loans and net losses have recently escalated as well.

The PLFS had concealed all its bad loans, so when those came to light the NAV per share sank, said Mizanur Rahman, professor of the Department of Accounting & Information Systems at the University of Dhaka.

Subsequently, he urged the government to hook those responsible for the hopeless situation of the NBFI.

“Now, the big question is whether the depositors will get a portion of their money back or not,” said AF Nesaruddin, president of the Institute of Chartered Accountants of Bangladesh.

Sami Huda, managing director of the PLFS, told The Daily Star on Monday that the central bank was yet to take a call on the NBFI’s liquidation.

“A special team of the Bangladesh Bank is auditing us for the last few days. A final decision will come after this audit report,” he added.