Who will safeguard investors?01 May 2014
Capital market regulators and stock exchanges say they have 'nothing to do' with financial figures of Khulna Packaging and Printing Ltd's (KPPL) which clearly appears exaggerated.
bdnews24.com investigated claims made by KPPL after the company was found showing a sharp jump in profits in its IPO prospectus.
The printing and packaging firm got Bangladesh Securities and Exchange Commission's (BSEC) clearance to raise Tk 400 million by issuing 40 million shares on Mar 4 this year.
KPPL's initial public offering (IPO) prospectus says the firm's revenue in 2009 -10 fiscal was Tk 340 million.
But, the very next year it surged to Tk 1.19 billion, up by a staggering 247 percent.
Then, between July 2011 and June 2012, the company's sales shot up to Tk 2.08 billion before dipping somewhat in July 2012- June 2013 to Tk 1.91 billion.
In its IPO, KPPL said around 63 percent of its revenue comes from its sister concerns, which are involved in sea-food business, mainly shrimp exports.
To achieve a sales of Tk 2 billion in packaging, industry insiders say, a company has to handle seafood products worth at least Tk 20 billion.
Bangladesh's total fish and shrimp exports stood at Tk 45 billion in 2011-12 fiscal and KPPL claims it has 18 percent of the national market share in packaging.
The market regulator says it has only to go by the auditor's statement and certification of the issue manager.
Saha Mazumder& Co. Chartered Accountants audited KPPL's financial statements while Sonali Investment Ltd is the issue manager of the IPO, the subscriptions of which open on May 5.
"The commission has to abide by the Public Issue rules, auditors' statement and due diligence certificate from the issue manager, to decide whether to accept or reject an IPO," BSEC Executive Director Saifur Rahman told bdnews24.com when asked about KPPL.
According to the Securities and Exchange Commission (Public Issue) Rules 2006, the regulator is authorised to take punitive action in case someone furnishes false information.
"If any issuer or its representative violates any of the provisions of these Rules or furnishes false, incorrect, misleading information or suppresses any information, the Securities and Exchange Commission may take appropriate action under the Securities and Exchange Ordinance, 1969," reads Section 19 of the public issue rules.
KPPL shares are expected to hit the trading floors within a month and the stock exchange authorities say they have no idea about the company's performance.
"The DSE is yet to evaluate the IPO prospectus of KPPL", Dhaka Stock Exchange's managing director Swapan Kumar Bala told bdnews24.com.
He was asked by this correspondent to take a look at KPPL's IPO prospectus and comment on it, which he agreed to but did not answer the phone despite several attempts after a few hours.
The response was similar from the Chittagong Stock Exchange (CSE) authorities.
"I don't know about KPPL yet, the relevant department is working on it," CSE managing director Syed Sajid Husain told bdnews24.com.
A DSE official, preferring not to be named, however, agreed with bdnews24.com's analysis and said that KPPL did inflate sales figures.
"Our (DSE) comment doesn't matter at all," the DSE official told bdnews24.com and added the bourse is not required to evaluate or comment on financial statements of IPOs.
After bdnews24.com ran the story on KPPL's claims in its IPO, the company issued a rejoinder, where it said the basis of the analysis was "not true".
"In our opinion, proper information should have been taken from proper authorities of the Company before publishing such an important issue."
bdnews24.com furnished comments of KPPL director Amzad Hossain in its report, which was recommended by the issue manager Sonali Investments Ltd.
During his conversation with bdnews24.com, Hossain did not even mention once that he was not authorised to comment.
Defending their claims of bdnews24.com's analysis being untrue, KPPL said in its rejoinder that they handled packaging of other garments and food products than just seafood as well as exported packaging materials.
It also claimed only 25 percent of KPPL's turnover came from packaging shrimp and fish.
However, on page 22 of its prospectus, KPPL said 63 percent of the products are consumed by its five sister concerns.
The names suggest, and the IPO and company website also state, that these five companies handle seafood.
According to KPPL's claim of '63 percent consumption by sister concerns', these five companies' contribution to the Tk 1.91 billion turnover in 2012-13 should stand at Tk 1.2 billion.
This contradicts with KPPL's claim of only 25 percent of its turnover coming from packaging seafood.