Bangladesh Welding Electrodes, a private limited company listed with the stock market, has kept its business activities on a hiatus due to a severe cash crunch.

For several months now, BD Welding's production has remained suspended after the company failed to open a letter of credit due to being a defaulter with Southeast Bank.

The company has now decided to sell off its factory land in Chittagong to pay off Southeast Bank's loan amounting to more than Tk 30 crore, according to a disclosure posted on the Dhaka Stock Exchange website recently. The land was mortgaged to the bank.

Steel giant BSRM, another listed company, will purchase the 2.49 acres of land for Tk 42 crore.

BD Welding will pay Southeast Bank Tk 22.57 crore with the sale proceeds of the land, while the rest of the outstanding amount will be waived by the bank, according to the company.

After paying off the bank loan, the rest of the sale proceeds will be used to shift its production facilities to Dhaka and restart business, said Rafiqul Islam, a director of BD Welding. The company will now purchase land in Dhamrai, Dhaka.

Islam holds the directorial position on behalf of the Investment Corporation of Bangladesh, which accounts for 34.54 percent of BD Welding's stakes. He is also the general manager of ICB.

BD Welding's financial crisis began with a flash flood that damaged its factory, according to Islam.

“The company could not perform well,” said Mohammed Gofran, additional managing director of Southeast Bank.

According to its financial statement, BD Welding incurred loss of Tk 3 crore in the nine months to March this year. Its earnings per share registered a loss of Tk 0.72 during the period.

Until 2010, BD Welding was in the 'A' category of stocks and declared dividends of more than 10 percent.

When it started announcing less than 10 percent dividend, it was downgraded to the 'B' category. In 2015 it was brought down to the 'Z' category as it stopped declaring dividends. Curiously, the company's share price has been on an upward trajectory for the last couple of weeks. It gained Tk 0.4 to close the week at Tk 16.

BD Welding was listed on the stock market in 1999 with paid-up capital of Tk 42.92 crore. As of April, of the total shares, 65.39 percent are held by public, 31.01 percent by sponsor-directors, 2.88 percent by institutions and 0.72 percent by foreign nationals.

Established in 1969, it was the first welding electrode manufacturer in the soil of the then East Pakistan, with its plant and machinery coming from Switzerland.

The plant was taken over by the government in 1973 as abandoned property only for to be divested in 1984. AR Khan, former deputy secretary and founder chairman of BD Welding, purchased the factory by ending up as the highest bidder. Khan continued to run BD Welding as a private limited company until March 1997.

In 1999, it entered the stock market through an initial public offering to raise fund to set up an industrial oxygen plant in Chittagong.