The Bangladesh Securities and Exchange Commission (BSEC) on Thursday rejected the Initial Public Offering (IPO) application of JMI Hospital Requisite Manufacturing Limited for violating securities rules.
JMI, a manufacturer of plastic, rubber and silicon components for medical use, will be able to submit a fresh IPO application if its management wants.
The company wanted to raise Tk75 crore from the capital market through the book-building method.
Sources said the company violated the public issue rules and overstated sales in its financial statements so that investors would be more interested in buying its shares.
The Investment Corporation of Bangladesh (ICB) has invested Tk81 crore as placement share of JMI, which was bought in premium.
But ICB Capital Management Ltd is also the issue manager of the company, along with Janata Capital and Investment Limited. According to the law, an issue manager cannot hold shares of its issuer company.
The company has also provided Tk109 crore in loans to its director's other company. If JMI takes back that sum, then there will be no need to come to the stock market.
Additionally, some 44 percent revenue of the company comes through sales from other companies of the group.
As a result, the owners of the company can manipulate the share price by artificially increasing and decreasing sales if they want to. On the other hand, the company can benefit by selling products at a lower price to a partner by depriving ordinary shareholders.
Earlier, the regulator also rejected the IPO applications of two other companies – Beka Garments and Textile Limited and SF Textile Industries – for showing inflated revenues and profits.
The commission found that both of these companies inflated revenues and profits and overstated inventories and assets in their financial statements.