Rejoinder: SERF says its placement in PSX’s Defaulter segment is unilateral

November 10, 2021 (MLN): Service Fabrics Limited (SERF) has issued a rejoinder against the Pakistan Stock Exchange notification whereby it has placed the company in the Defaulter’s segment.

The company considers the placement of its shares in the Defaulter's segment as unilateral and due to narrow, one-sided, rigid and unaccled-for interpretation of PSX's regulations.

As of now [11:17 am], the share price of the company dropped by 5.27% DoD and is currently trading at PKR11.50.

While reserving its right to initiate appropriate proceedings for the potential untold damage to the investors and the good name of the Company, its sponsors and directors by this blindsided action; the Company informs the shareholders that the above has been done without any consideration to the notices of material information having been continuously and timely shared with the market/shareholders since the start of the revival process of the Company.

The Company considers that these material notices would have given a clearer picture about the business affairs of the Company, which, unfortunately, has not been the case, the notice issued by the Company stated.

Last day, Pakistan Stock Exchange had placed Service Fabrics Limited in the Defaulter’s segment with effect from Wednesday, November 10, 2021.

With regards to the cited regulations of PSX's Rulebook leading to the placement of the Company's shares in the Defaulters' segment, the company informs the shareholders as under:

According to the notice issued by the company, under the regulation 5.11.1(b), the matter of suspension of commercial production/business operations is not applicable to the Company, on account of the following material progress having been achieved by the company post the balance sheet date:

• The memorandum for the change of principle line of the Company's business stands submitted to CRO, SECP, Lahore since July 09, 2021. The certified copy of the same is awaited due to the delay in the receipt of the discharge certificate from a bank, which is expected shortly.
• With regards to the new business activities of the Company, which had been approved by the shareholders (on May 29th, 2021) and the Lahore High Court (on Jun 28th, 2021), the Company has already commenced the business operations/activities that include; Calcium Carbide Project, Super Capacitor Project and Investment in GCIL.

While under regulation 5.11.1 (i), the matter of the qualified opinion on the Going Concern or adverse opinion in the audit opinion pertains to the financial year ended Jun 30th, 2021.

The existence of the above opinion for the past period should have been analyzed from the post-balance sheet developments happening in the Company.

Since then, the Company has undertaken the implementation of the revival business processes, which became possible when the Lahore High Court disposed of the matter of winding-up against the Company on Jun 28th, 2021, i.e., just two days before the close of the last financial year.

The fact that the shareholders have put their faith in the future prospects of the Company by subscribing to the right shares to the tune of PKR 2.3141 Bn, is a sufficient proof that the investors disregarded the existence of any qualified opinion on the going concern or any adverse audit opinion belonging to the past period.

Hence, the placement of the Company on the defaulters counter serves no purpose whatsoever, when the shareholders have already overwhelmingly contributed their investments believing in the revival plan of the Company, the notice added.

The Company is procuring the necessary audit certificate for satisfying the submission of the paperwork requirements of the Exchange.

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