Baraka Patenga asked to submit revised IPO application

Highlights

• The company wants to raise Tk225 crore to set up two power plants, pay back loans
• Revenue: Tk288.64 crore as of June 2019
• Net profit: Tk27.38 crore
• NAV per share: Tk20.15 as of June 2019
• EPS: Tk2.76

Instead of cancelling the initial public offering (IPO) of Baraka Patenga Power Limited, the stock market regulator has told the company to submit a revised application. 

The regulator asked the company to apply with a revised red-herring prospectus, updated audited financial statements, and other documents.

Using the book building method, Baraka Patenga wants to raise Tk225 crore from the capital market to raise Tk225 crore to set up two power plants and pay back loans. 

The regulator wanted to have revised documents of the company and its IPO application has not been cancelled, a Bangladesh Securities and Exchange Commission (BSEC) official said. "Also, the company will get over the shortcomings in its IPO process within a fixed time."

Baraka Patenga's issue manager LankaBangla Investments Limited said the regulator asked for the updated financial statements of the company. "We will submit a revised application with a red-herring prospectus."

The parent company of Baraka Patenga is listed on the capital market and its sponsors and directors, excluding the independent ones, are jointly holding only 18.01 percent shares, violating the securities rules. 

Baraka Patenga is a subsidiary company of Baraka Power Limited. After getting listed on the capital market, the company will become an associate of Baraka Power. 

This change will have a significant impact on Baraka Patenga's profitability, earnings per share (EPS), and net asset value (NAV) per share, the regulator said.

If the cut off price of Baraka Patenga's every share is set at Tk22 or less, then the joint stake of the sponsors and directors of the company will fall below 30 percent, the BSEC maintained.

In that case, the issuer and issue manager will try to influence the eligible investors to bid a higher price. 

The regulator also observed that the company overstated profit by understating depreciation expenses.

The company is enjoying tax exemption for 15 years from the date of its commercial operation in 2014, the BSEC said.

If the government changes tax exemption policy in future, the company will have to pay tax at the regular rate. Then Baraka Patenga's tax after profit and EPS will fall significantly.

Of its IPO proceeds, the company wants to spend Tk144.34 on equity investments in Karnaphuli Power Limited and Baraka Shikalbaha Power Limited, and Tk74.87 crore to pay back bank loans.

Incorporated as a private limited company in 2011, Baraka Patenga's main activity is to set up power plants for power generation and supply. 

Earlier, the regulator rejected the IPO application of eight companies for violating rules and overstating financial statements.

However, now it has asked for a revised application and updated documents from Baraka Patenga.