KUALA LUMPUR: More than a third of the RM49.38 million investment losses the Human Resource Development Corporation (HRD Corp) reported as of June 2023 came from its 62-sen a share investment in Widad Group Bhd, which is currently trading at 6 sen a share.
HRD Corp reported a paper loss of RM18.52 million from its investment in construction company Widad, which it bought into in 2020 through a put and call option agreement (PCOA).
Under the PCOA, HRD Corp has the right to buy (call) and sell (put) Widad stock at a specified price within a specific period.
Tycoon Tan Sri Muhammad Ikmal Opat Abdullah is a substantial shareholder of Widad.
As at April 2024, HRD Corp held a 3.12 per cent in Widad.
Complications arose on Nov 30, 2022, when HRD Corp's investment panel committee rejected a proposal for a second renewal of the agreement, citing Widad's failure to pay the agreed premium on the investment.
According to the AG Report 2024, despite HRD Corp's unrealised losses in Widad Group and decisions taken at two separate HRD Corp's investment panel meetings in 2022 and 2023 to not renew its investment in Widad, HRD Corp submitted a renewal of investment application to the former Minister of Human Resources on Oct 16, 2023 for approval.
This was on the basis that the investment agreement in Widad would expire in November 2023.
In 2023, V Sivakumar was Minister of Human Resources.
The AG report said that a review of the application documents found that insufficient information was provided, such as the investment panel's decision and market value trends, to help the former Minister of Human Resources make the best decision for HRD Corp.
Contents of the letter for approval to the former Human Resources Minister also did not tally with the analysis summary by the treasury department of HRD Corp dated Oct 10, 2023 which was approved by the chief executive officer of HRD Corp.
"Although this investment involved a very large amount, the former Minister of Human Resources approved the application on the same day without any comments," it said.
Based on the market value of Widad's shares on March 4, 2024, which was 12 sen, HRD Corp potentially faces an unrealised loss of RM48.42 million due to Widad's inability to repay the premium value.
Widad closed at 6 sen a share, giving it a market capitalisation of RM185.8 million.