Dhaka,  Saturday
15 June 2024

ACME Pesticides misleads investors on IPO proceeds

MD Mahfuzul Islam, Dhaka

Published: 08:05, 19 May 2024

ACME Pesticides misleads investors on IPO proceeds

Photo: Collected 

ACME Pesticides Limited allegedly provided misleading information during its initial public offering (IPO) process. The company overstated its paid-up capital by Tk 102 crore prior to being listed on the stock exchange.

Allegations have been raised that it did not utilise properly the funds raised through its initial public offering (IPO). The Bangladesh Securities and Exchange Commission (BSEC), the capital market regulator, has recently initiated an investigation on the matter.

Sources at the BSEC said the company with a paid-up capital of Tk 3 crore was uplifted to Tk 105 crore within six months. The company raised Tk 30 crore from the stock market through an IPO in 2021. But just before the IPO, it provided false financial information. The company also failed to utilise the IPO proceeds properly.  

It did not stop there; rather, it deceived investors and its workers. The BSEC has found preliminary evidence of such irregularities. The organisation has formed a three-member enquiry committee to find conclusive proof.

Regarding the issue, Mohammad Rezaul Karim, Executive Director and Spokesperson of the BSEC, told The Daily Messenger, “An enquiry committee has been formed to verify whether the information provided in the prospectus before the IPO and the utilisation of IPO proceeds were accurate.”

Sources said the three-member enquiry committee was formed with Mohammad Al Masum Mirdha, Additional Director, as the head. The other two members are Joint Director Sultana Parveen and Assistant Director Tarikul Islam. They have been asked to submit the investigation report within 30 working days. The committee has been instructed to inspect the company's head office, factory, and verify all financial reports if necessary.

Attempts were made multiple times to contact Ariful Alam, the company secretary, on his mobile phone, but he did not receive the calls.

According to BSEC information, the company raised Tk 30 crore in 2021 by issuing 3 crore shares at a face value of Tk 10 each. Of this, Tk 10 crore was planned for factory building and other construction, Tk 2 crore for electrical installation, Tk 10 crore for acquiring new plants and machinery, Tk 5.5 crore for bank loan repayment, and Tk 1.8 crore for IPO expenses. However, the BSEC has information that the company did not utilise the funds properly. The commission has information that Shiraz Khan Basak & Co., Chartered Accountants, was the auditor during the IPO, but the Institute of Chartered Accountants of Bangladesh (ICAB) blacklisted the firm for being involved in deception.

According to pages 22 and 23 of the prospectus provided before the stock listing, nearly 97 percent or Tk 105 crore of the paid-up capital was issued in the second half of 2019 (June 15-December 30, 2019). This includes Tk 47 crore in share money deposits, Tk 30 crore in cash, and Tk 25 crore in bonus shares. The BSEC believes there were significant irregularities in this regard.

The information about net operating cash flow per share (NOCFPS) for the last five financial years provided on page 78 of the prospectus does not match the information given on page 216 on the same issue. On page 78, they showed NOCFPS of Tk 2.28 for FY 2019-20, Tk 2.59 for FY 2018-19, Tk 1.97 for FY 2017-18, Tk 2.00 for FY 2016-17, and Tk 1.45 for FY 2015-16.

However, on page 216, they showed NOCFPS of Tk 2.11 for FY 2019-20, Tk 1.94 for FY 2018-19, Tk 1.41 for FY 2017-18, Tk 1.44 for FY 2016-17, and Tk 1.04 for FY 2015-16.

The basic earnings per share (EPS) information provided on page 79 does not match the same information given on pages 216 and 217. On page 79, they showed EPS of Tk 2.00 for FY 2019-20, Tk 2.13 for FY 2018-19, Tk 1.47 for FY 2017-18, Tk 1.41 for FY 2016-17, and Tk 1.10 for FY 2015-16.

But on pages 216 and 217, they showed EPS of Tk 1.85 for FY 2019-20, Tk 1.59 for FY 2018-19, Tk 1.05 for FY 2017-18, Tk 1.01 for FY 2016-17, and Tk 0.79 for FY 2015-16.

On page 96, the company stated that no director was involved with the stock market and was not associated with any listed company in the last three years. However, on page 22, it is mentioned that the company's independent director, Professor M. Shahjahan Mina, is a director of Bank Asia Securities and a director of the listed company Bangladesh Shipping Corporation.

Although details of land development were requested, ACME Pesticides did not disclose them on page 57. The company showed an asset of Tk 3.33 crore for land development.

On page 149, it is mentioned that Tk 9.44 crore of paid-up capital in FY 2012-13 was used for land and land development, among other purposes. However, according to page 57, no land was purchased in that financial year.

Moreover, as per BAS-16, land development is a depreciable asset. It includes assets like walls, roads, etc., which have a specific lifespan. But the company did not charge depreciation on land development, allowing it to show higher profits and assets regularly.