The Bangladesh Securities and Exchange Commission has scrapped the initial public offering of BD Paints as the stock market regulator detected several flaws in the company’s financial statements.
The BSEC on Tuesday rejected the IPO application and sent separate letters to the company and its issue managers, informing them the decision.
BSEC officials said that the commission found a number of inconsistencies in the financial documents of the company.
The company overstated profits and showed excess receivables in the financial statements, they said.
The company also showed higher sales, and lower inventory turnover ratio and return on equity to paint a rosy picture in the financial statements, they said.
The officials also said that the Dhaka and Chittagong stock exchanges gave observations on the company’s IPO, exposing a bleak situation of the company.
BD Paints’ pre-IPO paid-up capital stood at Tk 50 crore after issuing a huge number of placement shares worth Tk 28 crore in 2018 and Tk 12 crore in 2015, the officials said.
Besides, the Financial Reporting Council has been investigating the financial statements of the company as it suspected various irregularities in the statements.
The FRC also queried its auditor Mahfel Huq & Co about the various irregularities in the financial statements of the company.
BD Paints had intended to raise Tk 20 crore through its IPO in order to expand its production capacity despite 60 per cent of its existing capacity remained unutilised.
An IPO review panel of the Dhaka Stock Exchange had observed a number of flaws in the company’s financial statements and the observations were sent to the commission.
According to the DSE panel, the company did not pay any tax except advance income tax in any year. The AIT was related with imports.
Its chief financial officer and company secretary’s basic salary was Tk 15,600 and gross salary Tk 27,400 per month, which was very poor and raised question about the employees’ capability, the panel observed.
The company recognised earnings per share Tk 1.03 and Tk 2.13 for the financial years 2019 and 2018 respectively, but it did not provide any reason for such a significant deviation, it observed.
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