Company secretary says search on for new business opportunities for recovery
Atlas Bangladesh, a motorcycle assembler and distributer, has been sinking deeper into losses ever since fiscal 2015-16 when its agreement with Hero Honda came to an end.
This fall of what was once a blue-chip stock has now raised questions among investors about the firm’s sustainability.
After the deal expired, Atlas tried to retail Zongshen bikes but the Chinese brand failed to make a mark in the country’s burgeoning two-wheeler market.
As a result, the state-run company’s accumulated losses stood at Tk 21.88 crore in 2019-20. This even prompted the company’s auditor to raise concerns of “material uncertainty on its going concern due to five consecutive years of loss”.
Going concern is an accounting term that relates to whether a business entity has the resources to continue operations in the future.
“Our company’s profits started to fall when our agreement with Hero Honda ended, which was just after Hero and Honda split up,” said Sanjay Kumar Datta, company secretary to Atlas Bangladesh.
In 2013, The Honda Motor Company of Japan announced that it ended its joint venture with India’s Hero Group.
It was then that Hero joined hands with a local automobile company, Nitol-Niloy, while Honda started directly marketing its products in Bangladesh.
Listed with the DSE in 1988, Atlas has a paid-up capital of Tk 33 crore.
In fiscal 2019-20, the company reported losses of Tk 4.45 crore, which was 36 per cent higher than that the year before, when it was Tk 3.27 crore.
Atlas’ per share net operating cash-flow stood at Tk 1.44 in the negative at the end of last year.
After its deal with Hero Honda expired, Atlas inked a two-year agreement with the Chongqing Zongshen Group in 2016 to import, assemble and market their motorcycles, Datta said. The Chinese company was one of the leading two-wheeler companies in China.
“In the first two-three years, we sold around 6,000 bikes of the brand. However, this brand failed to attract consumers further because of piling up of complaints from consumers,” Datta said.
However, the brand received numerous complaints and failed to win the hearts of Bangladeshi consumers, leading to an automatic drop in sales, he added.
Atlas also formed an agreement with India’s TVS Motor Company in 2018 in order to procure the materials needed from TVS Auto Bangladesh to assemble and supply motorcycles to certain government institutions.
“But since this only allows us to sell the product to government offices, we are searching for new business,” Datta added.
The government holds a 51 per cent stake in Atlas Bangladesh while institutional investors hold 16.94 per cent and general investors have 32.06 per cent.
“It is disappointing for investors to see that what was once the second largest player in the local motorcycle market is now struggling to survive,” said Hakim Ali, a stock investor.
He said the company’s management should try to find new business opportunities since consumers still have confidence in the state-run entity.
The company’s stocks closed at an unchanged Tk 109.40 yesterday at the DSE.
