Star Ceramics Limited, a Bangladesh-Lebanon joint venture, has withdrawn its application to go public, apparently following initiatives to enquire about the foreign investor’s source of fund.
The company filed the initial public offering (IPO) application with the Bangladesh Securities and Exchange Commission (BSEC) a year ago but applied to opt out of the IPO process in May this year.
BSEC officials said the company’s plea to discontinue its IPO application was granted formally in May this year.
Bangladesh Financial Intelligence Unit (BFIU) sources said the company, which manufactures tiles and sanitary ware, shied away from the IPO process as its foreign investor is embroiled in an ongoing money-laundering investigation in the United Arab Emirates (UAE).
Dr Khater Massaad, 66, is a Lebanese-Swiss national who is the foreign sponsor of Star Ceramics. He is the founder of Star Industrial Holding Limited, a Lebanese group that owns ceramics and real estate businesses in countries like Bangladesh, India, Saudi Arabia, Nigeria and Ethiopia.
Massaad was convicted in a UAE court of embezzling $150 million of public funds during his tenure in Ras Al Khaimah Investment Authority (RAKIA) as its Chief Executive Officer until September 2012.
RAKIA is an UAE organisation that was established with a vision to become the leading authority in making sound investments from Ras Al Khaimah, one of the seven emirates that make up the UAE.
Serajul Huq’s Associates, a Bangladeshi law firm appointed by RAKIA, earlier this year sent a legal notice on the BFIU and BSEC, claiming that Star Ceramics had received a substantial portion of its start-up capital from funds laundered by Massaad from the UAE.
The law firm attached copies of UAE court verdicts in four different cases against Massaad and two of his associates that sentenced him to 15 years in prison along with an order to refund the entire amount.
Massaad allegedly brought a substantial proceed from his financial dealings to Bangladesh, and invested in Star Ceramics, Star Porcelain and Rakeen Development Company (BD) Limited, the legal notice claims.
Sources said the BSEC was to send a query to the company in response to Serajul Huq’s Associates’ legal notice but the company opted out of the IPO process just before the letter was to be posted.
In 2012 and onwards, Star Ceramics received more than Tk65 crore remitted from abroad as share money deposited in favour of Star Investment SAL.
A holding company invests in shares of other companies to own the business entirely or partially.
The foreign firm in 2014 transferred its entire 43 percent stake in Star Ceramics to Star Bangladesh Holdings Limited (SBHL) and Massaad was representing the new holding company too that was registered in Bangladesh.
In 2017, he resigned from the board of Star Ceramics following his conviction and SBHL nominated his son Bernard Gilbert Massaad to be in the board.
But Bernard also left the board when more information on the financial crime began to unfold. Syeed Ahmed, a Bangladeshi engineer, is now representing the holding company.
Ajay Kumar, chief financial officer of Star Ceramics, told the Business Standard he was unaware of any money laundering investigation that led to the IPO withdrawal decision.
He admitted that the company was going through some management issues, but said it didn't have any connection with the IPO process.
He, instead, blamed the slow IPO process for the decision to withdraw the IPO application.
“We intended to go public for expanding our business. But due to slow progress of the IPO process, we had to rethink the entire plan,” he said.
On March 29 last year, Star Ceramics arranged a road show at a hotel in Dhaka with a view to get the attention of investors.
It filed an application to be listed on the stock market for raising Tk60 crore through the book building method – an IPO process in which qualified institutional investors determine primary share prices through bidding.
Star Ceramics, which started as a private company in 2010, turned into a public limited company in 2013.
According to initial disclosures, Tk43.31 crore of the total IPO proceeds, was to be used for expansion of the company’s sanitary ware plant, and the rest for repayment of bank loans as well as IPO formality expenses.