Suspension akin to defaulter cos bailout

Tag : garment stocks



Suspension akin to defaulter cos bailout


By Dilawar Hussain

KARACHI, Aug 8: Since January this year, the Karachi Stock Exchangehas suspended more than 20 companies, which many investors see as abailout of delinquent companies.

Sixteen of those companies were suspended in the first week ofAugust.

The first few to be pushed aside this month included: Natover Leaseand Refinance; Natover (Pref); Business and Industrial Insurance;Sahrish Textile; Adil Textile and Interasia Leasing Company.

On Aug 5, the KSE issued a notice stating: Since the followingcompanies have, so far, not removed the cause of suspension oftrading in their shares, the management of the KSE in the interestof trade and public and in exercise of the powers vested underListing Regulation No 5(2)(iii) read with Section 9(7) of theSecurities & Exchange Ordinance, 1969, has decided that trading inthe share of these companies shall be kept suspended for a furtherperiod of 60 days from Aug 8 or until such time as the cause ofsuspension is removed.

The companies included First Tawakkal Modaraba; Kohinoor Looms;Tawakkal Garment Industries; Zahur Textile Mills; TawakkalPolyester Industries; Mian Mohammed Sugar Mills; Tawakkal Limited;Standard Insurance Company; Ayaz Textile Mills; Mohib Exports; DataAgro; Muslim Ghee Mills; Ittefaq Textile Mills; Harnai WoollenMills and Bela Engineers Limited.

Later on Aug 7, trading in stock of Sindh Alkalis was also put onthe hold.

The companies are initially suspended for 60 days, but it has beenobserved that the term continues to get extended over and overagain.

Some investors complain that the exit route for delinquentcompanies runs the familiar course: placing them on the defaulterscounter, suspension and delisting.

Small shareholders lament the loss of their investment in suchcompanies. But the KSE has continued to justify such suspensionsand delisting as entirely in public interest.

Companies are picked up from those languishing on the defaulterscounter for violations under section 32 (1) of the listingregulations, says a bourse official.

A host of reasons are cited for their delisting. Many of them havenot responded to KSE notices; some are under liquidation, whilemany others simply do not even exist, said a KSE official.Although he did admit that small investors who had taken stake inthose companies could go to lose money  unless they get somethingon liquidation it was the new unsuspecting investors that thestock exchange had sought to protect.

If such companies remain listed, new investors not knowing theircurrent status could dabble in those stocks and eventually findthemselves trapped, the KSE official said.

Naming and shaming by placing companies on defaulters counter bythe KSE, which started many years back, has done some good to forcedelinquent managements to fall in line. Persuading chronicloss-making companies to buy-back shares has resulted in yieldingwell-brokered repurchase prices of dead stock for smallshareholders.

Instead of suspension and de-listing of companies without paying apaisa to small shareholders, investors ask that the marketregulators should compensate at least the initial investment ofshareholders through the sale proceeds of whatever assets of thosecompanies that could be confiscated, like land, machinery, etc.

If there is no law to intrude into property of those companies, alaw needs to be made, said an irate shareholder who invested in atextile mill on the promise of bright future and ended up in thedark allay. But given the current state of the stock market, theregulators already have too many problems on their head withoutworrying about the dead and the dying companies.