The Financial Reporting Council is investigating the financial data of Associated Oxygen Limited on suspicion of anomalies.
The Bangladesh Securities and Exchange Commission, however, on July 15 approved the initial public offering of Associated Oxygen despite Dhaka Stock Exchange’s reservations about the company’s IPO.
An IPO panel of the DSE, the country’s premier bourse, made the reservations in January this year.
Earlier on June 18, 2019, the DSE proposed ‘no recommendation’ about the company’s IPO to the BSEC.
FRC executive director Sayeed Ahmed told New Age that the regulatory body had recently launched an investigation into the Associated Oxygen’s financial documents on suspicion of financial flaws.
It had sought documents from the company and its auditor Shiraz Khan Basak & Co, he said, adding that the company had already provided the documents sought, but the auditor was yet to respond to the request.
Sayeed said that the accounting regulator might also seek more documents.
As per the company’s financial statements, the issuer has cash in hand Tk 8.96 lakh and cash in bank Tk 34,918, and the same situation has continued for the last five years.
‘This indicates that the company has little or no capacity to meet up any future emergencies such as dividend payment to its shareholders, capital machinery purchase or any other foreseeable obligations,’ DSE IPO panel observed.
‘Inventory turnover ratio for the year 2018 was 4.59 times while the industry average ratio was 46.55 times which indicates that the company is not capable enough to turn its inventory to sales,’ it said.
Debt to equity ratio in 2018 was 8.19 times while the industry average ratio was 0.74 times, which indicates that the company holds higher proportion of debt in relation with its equity, the panel also said.
Associated Oxygen chief financial officer Delower Hossain told New Age that the company replied properly to the queries made by the DSE in this connection.
He said that cylinders were very much expensive and sometimes these materials remained stuck for months without utilisation that dipped inventory turnover ratio.
The DSE panel also said that earnings per share of the company in 2015-18 were calculated using share money deposit amount, which should be based on the number of share outstanding as per accounting standards.
The company did not make any provisions for workers’ profit participation and welfare fund in 2018, 2017, 2016 and 2015 and also against employees’ benefit, breaching labour law.
According to corporate governance code, the chairman of the company’s board must be elected from the non-executive directors of the company and so, the chairman cannot receive any salary except meeting fees.
But, Associated Oxygen chairman Nizam Uddin Chowdhury enjoyed remuneration of Tk 80,000 per month, violating the code, the DSE panel said.
The company’s top executive — chief financial officer and company secretary — who said to have more than 12 years of experience received only Tk 30,000 per month as salary, raising doubt about their efficiency.
Fahim Chowdhury and Azmine Mahatab Chowdhury became directors in 2017 at the age of 18 years through buying placement shares worth around Tk 1.8 crore.
With just higher secondary school certificates, both directors enjoyed more than Tk 61,000 per month as salary.
Sayeed said that these were the signs of poor governance in the company.
The subscription of the company’s IPO is scheduled to start on September 10 to collect only Tk 15 crore, whereas the company has pooled around Tk 73 crore through issuing placement shares.
Market experts said that companies went public to give a better exit to their placement-share holders on many occasions.
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