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JMI Hospital Requisite distorts financial data

BSEC rejects IPO of firm, also involved in N95 mask scam

Staff Correspondent | Published: 23:41, Jul 30,2020

 
 

The Bangladesh Securities and Exchange Commission on Thursday declined JMI Hospital Requisite Manufacturing Limited’s initial public offering as the company falsified and distorted financial data.

JMI Hospital was also involved in the recent N95 masks scam.

The company overstated receivables to display high revenue in the financial statement.

It also showed reduced depreciation expense to display higher profits, which led to false and misleading reporting of financial results, the BSEC observed.

The regulator also found that 40 per cent revenue was generated from sister-concern companies, which was suspicious.

The commission observed that the Investment Corporation of Bangladesh held 30 per cent shares of JMI Hospital and was also acting as issue manager of the company’s IPO, which was a violation of securities rules.

Besides, the company loaned its related companies Tk 109 crore in total and the company could address its financial need from the recovering of the loans rather than raising funds from the market, the BSEC observed.

JMI Hospital was also accused of supplying fake N95 masks to the health ministry.

When the masks were supplied to several hospitals, including the Mugda General Hospital in Dhaka, doctors questioned their quality.

The Anti-Corruption Commission on July 8 queried  Abdur Razzak, chairman of JMI Hospital, over the allegations of corruption in purchasing N95 masks, personal protective equipment (PPE) and other materials.

The Dhaka Stock Exchange also detected various anomalies in the company’s IPO prospectus and had sent its observations to the market regulator.

JMI Hospital raised Tk 80.05 crore as paid-up capital in the period from March 23, 2016 to December 12, 2018.

The company did not prepare financial statements in line with international accounting standards though it claimed full compliance with the standards, the DSE IPO panel observed.

The panel observed that there were huge uncertainties about the realizability of loans worth Tk 109 crore provided by the company to its sister concerns and future profit earnings of the company.

The company paid minimum 11 per cent interest to the ICB against share money deposits of Tk 81 crore from 2016 to 2019, which was a violation Company Act 1994 that states that share money deposit may carry interest maximum at 4 per cent up to issuance of shares.

Moreover, out of the interest, Tk 8.91 crore and Tk 9.82 crore were capitalised in the years 2019 and 2018 respectively, resulting in an over statement of the net profit.

The DSE panel expressed significant doubts about the authenticity of the financial statements.

JMI intended to raise Tk 75 crore from the capital market under the book building method.

ICB Capital Management Limited and Janata Capital and Investment Limited were the issue manager of the IPO. Pinaki & Company was the auditor of the company.

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