1. Orient Group Incorporation announced today that the controlled shareholder Dongfang Finance Company has restrictions on withdrawing deposits exceeding 1.6 billion yuan. 2. The Shanghai Stock Exchange quickly issued a regulatory letter, requesting the company to investigate whether related funds have been embezzled by the controlling shareholder and related parties, whether it constitutes non-operating fund occupation, and etc. 3. Previously, the controlling shareholder of Orient Group failed to repay bank loans within the stipulated period, and Dongfang Group's guarantee was overdue.
Conglomerate Oriental Group (600811.SH) has struggled with its performance in recent years. The company and its subsidiaries are restricted from drawing a large sum of deposits exceeding 1.6 billion yuan from the financial company under its subsidiary, Oriental Financial Company, bringing about regulatory letters from the Shanghai Stock Exchange.
On the evening of June 18th, Oriental Group issued a sudden announcement that the company recently received a written reply from its related party, Oriental Financial Limited Liability Company (hereinafter referred to as "financial company"), as the liquidity of the financial company has temporarily tightened, leading to significant withdrawal limits on deposits in the financial company by the company and its subsidiaries. This has resulted in the company activating its risk disposal procedures.
By June 17th, 2024, Oriental Group and its subsidiaries had a deposit balance of 1.64 billion yuan and a loan balance of 666 million yuan in the financial company.
As soon as the announcement was made, the Shanghai Stock Exchange swiftly sent out regulatory letters, demanding that Oriental Group investigate the placement and use of deposits in the financial company, including whether related funds have been embezzled by the controlling shareholder or affiliated parties and whether it constitutes non-operational capital occupation.
According to Tianyancha, the financial company is a holding subsidiary of Oriental Group Company, the controlling subsidiary of the listed company, whose business scope includes enterprise group financial company services and non-bank financial business.
The emergence of liquidity problems facing Oriental Group's controlling shareholder is not new. In April this year, Oriental Group's guarantees were overdue, as its controlling shareholder failed to repay bank loans within the stipulated time. Last year's annual report of Oriental Group was issued with an 'unqualified opinion' audit report, mainly due to the financial issues of its controlling shareholder.
The relationship between listed companies and the financial companies of their controlling shareholders has always been a concern of regulators. On April 29th this year, the China Banking and Insurance Regulatory Commission issued the 'Guiding Opinions on Promoting the Standardised and Healthy Development of Enterprise Group Financial Companies and Enhancing Regulatory Quality and Effectiveness'. Despite this strong regulatory environment, some listed companies have still stumbled. On June 7th, ST Yili (600277.SH) disclosed that by the end of 2023, the balance of deposits in Yili Financial Company by the company and the scope of the merger was 3.9 billion yuan, mainly used for loans to Yili Resource Group and its affiliated parties.
In its announcement, ST Yili also stated that 'since Yili Financial Company was listed as a defaulter and was subject to administrative penalties by the Beijing Regulatory Bureau of the China Banking and Insurance Regulatory Commission due to inaccurate asset classification, long-term absence of senior executives, and the impact of risk resolution progress of Yili Resource Group, the related loans have been classified as subprime loans (a type of non-performing loan), and this 3.9 billion yuan may have significant recoverability risks.'
It is worth noting that ST Yili's closing price has been below 1 yuan/share for 17 consecutive trading days. Even if it rises by the limit for 3 consecutive trading days in the future, it cannot return to above 1 yuan/share, and the company's stock has been locked for mandatory delisting. Oriental Group's closing price as of the 18th was 1.35 yuan/share and is now close to the delisting red line of 1 yuan/share.
According to Oriental Group's financial report, the company achieved revenue of 413 million yuan in the first quarter of 2024, a decrease of 78.74% year-on-year; the attributable net profit to shareholders of the listed company was 172 million yuan, a year-on-year increase of 78.65%.