After its controversial listing on the stock exchanges in 2018, Kattali Textile has now come under the regulator's scanner for its decision to invest Tk10 crore to buy 40 percent stakes in a company that is yet to start operations.
The Bangladesh Securities and Exchange Commission (BSEC) early this month issued a letter to the listed company asking it to provide all information of Kattali and Lucky Organics, an agro-based company where the company wants to invest.
Such investment includes a related party transaction as per International Accounting Standard 24. So the proposed investment scheme has to be certified by the auditor, it said.
The regulator also sought a copy of Lucky's feasibility report prepared by an independent third party.
The BSEC asked Kattali to provide details of all of its directors, including independent directors, who were present in the board meeting, along with the minutes.
Also, the regulator wanted to know how Kattali estimated Lucky's future profits.
The company's board of directors estimated that revenue from the project would be Tk1.64 crore in the first year, Tk2.37 crore in the second, and Tk2.79 crore in the third.
Sattabrata Das, company secretary of Kattali, told The Business Standard, "We will own a 40 percent share of the new company, while some other investors will own the rest."
The company would disclose the investment features later, said Sattabrata.
Kattali's net profit increased by 20.69 percent in the first half of the current fiscal year. During this time, the company's earnings per share were Tk0.62 and net asset value Tk17.24.
Kattali, in the last fiscal year, offered a 2 percent cash dividend and a 10 percent stock dividend to its shareholders.
The textile company raised Tk34 crore through an initial public offering (IPO) in 2018. It then issued 3.4 crore shares with a face value of Tk10 per share.
The company's trading started on November 12, 2018, in the Dhaka Stock Exchange (DSE) with a trading price of Tk24.40. Its share price rose to a record Tk33, on December 3, the same year.
On June 26, 2018, the BSEC allowed the garment exporter's IPO proposal despite negative recommendations from the DSE.
The IPO of Kattali should not be approved, the DSE said, as it had failed to submit some essential documents. The exchange wanted to verify the authenticity of the data presented in the draft prospectus of the company.
However, the closing price of the company's share in the DSE was Tk11.80 on Thursday.