The Dungsam Polymers Limited, a subsidiary of Druk Holding and Investments that manufacture cement bags recorded a loss of Nu 28 M last year according to their latest financial statement. It also made a loss of Nu 24 M in 2013.
While the company was expected to produce 100,000 cement bags a day, it has been producing only about 47,000 bags a day today. The cement bags are mostly sold to Dungsam cement while some are sold in the Indian market.
However, since Dungsam Cement Corporation has not been able to make enough revenue to even pay for the loans it has taken to build the project, Dungsam polymer’s sale of cement has also been affected.
The Chief Executive of Dungsam Polymers, Norbu Tshering said although the company is underperforming today, production is picking up and by the end of this year, it is expected to reach 70 percent.
He said most of the cement bags have to be sold to Dungsam, since there are only small buyers of cement bags in India and bigger cement factories have their own polymer plants.
Dungsam polymers started operation in August 2012. Since then, its production has barely crossed 60 percent. In 2013, the company divested its share to the public through an initial public offer.
The shares were sold at a premium value of Nu 165 a share. The offer was oversubscribed three times by investors. Today, however, the company has not even been able to declare dividends to the investors.
On its shares being sold at a premium, the company’s IPO prospectus mentioned that future cash inflows were good and predictable since it had a ready market in Dungsam Cement Corporation.
Both the chairman of Druk Holding and Investments and the Chief Executive of Dungsam polymers did not want to comment on whether it was justified to have sold the share at a premium since the company was not performing as well as it was expected back then.
