MD's authoritarianism leads to management failure in DSE (Part II)

The Dhaka Stock Exchange (DSE), the country’s premier bourse, appears to be struggling on both the business and governance fronts, with its latest audited financial statements exposing a sharp deterioration in core earnings, growing exposure to troubled banks and mounting questions over administrative accountability under Managing Director Nuzhat Anwar.

The numbers are particularly damning.

During FY25, DSE earned just Tk 101.03 crore from trading fees and other operating sources against operating expenses of Tk 108.30 crore, leaving the exchange with an operating loss of Tk 7.27 crore from its core activities.

Its principal source of revenue�"trading fees�"plunged 20.6 per cent to Tk 59.04 crore from Tk 74.09 crore a year earlier.

Yet DSE managed to report a net profit of Tk 31.19 crore. The apparent profitability, however, masks the weakness of its core business: the exchange earned a staggering Tk 94.10 crore in interest from bank deposits and bonds. In other words, the bourse made money from parking money rather than from doing what a stock exchange is supposed to do-facilitating a vibrant securities market.

Market insiders say such dependence on interest income is hardly a sustainable business model for a stock exchange and raises fundamental questions about the performance of its management.

The financial statements also expose another disturbing vulnerability: a substantial chunk of DSE funds remains locked up in financially distressed banks.

According to the audit report prepared by Hoda Vasi Chowdhury & Co, around Tk 105.08 crore of DSE funds is stuck in five troubled banks. Of this, Tk 92.389 crore is in fixed deposits, while another Tk 12.69 crore is lying in DSE's clearing account with Social Islami Bank.

DSE has Tk 356.81 crore in fixed deposits with different banks, including Tk 48 crore with EXIM Bank, Tk 19.39 crore with Union Bank, Tk 16 crore with Global Islami Bank, Tk 5 crore with IFIC Bank and Tk 4 crore with Social Islami Bank.

For an institution entrusted with safeguarding the interests of the capital market, such exposure to troubled banks raises serious questions about treasury management and risk assessment.
The exchange's balance sheet also underwent a dramatic contraction. DSE's total assets fell from Tk 4,842 crore in FY24 to Tk 2,403 crore in FY25-a staggering Tk 2,439 crore, or 50.37 per cent, decline in a single year.

The financial statements attribute most of the fall to an adjustment of around Tk 2,436 crore relating to ESS operations and claims settlement accounts. But the scale of the adjustment inevitably raises questions about the clarity and transparency of the exchange's financial reporting.

DSE is simultaneously locked in a legal dispute with the National Board of Revenue (NBR) over around Tk 9.68 crore in outstanding tax.

And while the exchange's core business was bleeding, its expenditure remained substantial. DSE spent Tk 46.42 crore on salaries and allowances, nearly Tk 39.97 crore on ICT and Tk 42.15 crore on depreciation in FY25. Depreciation alone rose from Tk 36 crore in the previous fiscal year.

Turnover excuse cannot hide management failure
DSE Director Minhaj Mannan Emon attributed the operating loss primarily to weak market turnover, saying the exchange generally incurs losses when daily turnover falls below Tk 750 crore.
Daily turnover, he said, had remained between Tk 300 crore and Tk 400 crore in recent years.

That explanation, however, only tells half the story.

With turnover now crossing Tk 1,000 crore, Emon said DSE should be able to generate profit from its core operations in FY27 if the trend continues.

But the obvious question remains: what has the management done to make the exchange less vulnerable to weak turnover and more capable of generating sustainable revenue from its core business?
A premier bourse cannot simply wait for market turnover to rescue its bottom line.

Regarding the funds deposited with troubled banks, Emon acknowledged that nearly Tk 100 crore was held with institutions including EXIM Bank and Union Bank. He said DSE had approached relevant government authorities for recovery but admitted that recovering the money could be difficult without effective government intervention.

That admission itself exposes the weakness of the exchange's financial risk management.

Governance questions deepen
The financial concerns are compounded by allegations of arbitrary decision-making by MD Nuzhat Anwar, particularly in recruitment, transfers, postings and other administrative matters.

Several DSE officials have alleged that the MD's personal decisions are being given greater weight than established institutional procedures. Questions have also been raised over whether due process is consistently followed when officials or departments face administrative action.

The reasons behind some decisions, officials allege, are not always properly communicated. Many employees, however, are reluctant to speak openly for fear of damaging their careers.
"If there is no scope to raise questions in the interest of the institution, accountability becomes weak. An MD should be powerful, but at the same time, he or she must remain accountable," said a DSE official seeking anonymity.

A management source defended the MD, saying strict administrative action should not automatically be branded arbitrary. The MD has the authority to take decisions aimed at improving organisational efficiency, the source said.

Whether those decisions represent legitimate management authority or an abuse of power, the source added, can only be established by examining the relevant documents.
That is precisely why transparency matters.

Silence from MD
Repeated attempts were made to obtain comments from Nuzhat Anwar on the financial and administrative allegations. She did not respond to phone calls.

The questions were subsequently sent to her via WhatsApp. Even after 10 days, she provided neither a response nor an explanation.

For the head of the country's premier stock exchange, such silence is difficult to reconcile with the basic principles of corporate accountability-particularly when the allegations concern the institution's financial performance, investment decisions and internal administration.

The issue is therefore no longer merely about whether DSE made a profit on paper.

It is about what kind of profit it made, why its core business is losing money, why substantial funds remain exposed to troubled banks, why its assets underwent a massive adjustment and whether its management is operating with adequate transparency and accountability.

Regulator finally steps in
The Bangladesh Securities and Exchange Commission (BSEC), the capital-market regulator, has taken notice of the allegations.

BSEC spokesperson Md Abul Kalam said the matter was primarily an internal issue of DSE, which has its own rules, regulations and board.

However, given the allegations, BSEC has formed an investigation committee to determine whether any regulations or prescribed procedures were violated.
The committee's findings could therefore prove crucial.

DSE's board, meanwhile, cannot simply wash its hands of the matter. As the body responsible for overseeing the exchange's management, it has a duty to ensure that executive authority does not become unchecked authority.

The latest financial figures and governance allegations together paint an uncomfortable picture: a bourse whose core business is losing money, whose profitability increasingly depends on interest income, whose funds are exposed to troubled banks, whose balance sheet has undergone a massive adjustment and whose management faces allegations of arbitrary decision-making.
For an institution at the heart of Bangladesh's capital market, that is not merely disarray.

It is a serious management and governance warning-and one that neither the MD nor the DSE board can afford to ignore.