The auditor of Aman Cotton Fibrous Ltd detected irregularities in the use of initial public offering (IPO) funds and gave a qualified opinion on the utilisation of the funds in the August audit report.
The company failed to use its IPO proceeds within the scheduled period, the auditor found.
The auditor also found that the Tk73 crore FDR made from IPO proceeds was pledged as security for credit facilities enjoyed by other entities.
Of the entities, Akin Carries Limited enjoys credit facilities as overdraft on balance of the Tk38 crore FDR in Meghna Bank and another one of Tk15 crore in Al-Arafah Islami Bank. Also, Aman Food Limited enjoys similar facilities from a Tk20 crore FDR in Commercial Bank of Ceylon PLC.
The auditor found that the company had repaid Tk2.16 crore out of Tk4.77 crore of IPO fund accounts. It also repaid Tk1.48 crore which came from FDR made from IPO proceeds.
Due to the irregularities, the securities regulator in June appointed a special auditor – Howladar Yunus & Co – to investigate the use of IPO proceeds and audited financial statements of the company.
The company gave loans to one of its sister concerns without the approval of its general investors. As a result, investors were deprived of gains and lost a lot of capital.
Back in August 2018, Aman Cotton collected Tk80 crore from the share market to buy new machinery and repay its loans.
However, until now, the company has only repaid its loans. It has not bought any new machinery, leaving around Tk72 crore of the IPO funds unused.
It previously declared it would complete all the work within 12 months of obtaining IPO funds.
Chartered accountant firm Shafiq Basak and Co has been regularly auditing the IPO projects of Aman Cotton.
The board of directors of the company recommended a 10% cash dividend for the financial year ending on 30 June, 2019. Earnings per share of the company was Tk2.11 and the net asset value per share stood at Tk42.76 at the time.
Last year, the company's net profit was Tk20.48 crore, which was Tk5.27 crore less than the previous year.
The company manufactures 100% cotton-carded, combed and semi-combed, and ring-spun grey yarn for knitting as well as weaving.
It went into commercial production on 1 November, 2007. The last trading price of each share of the company at the Dhaka Stock Exchange was Tk18.60.
It was listed on both of the country's stock exchanges in 2018.