Central Pharma provides vague information to shareholders: Auditor

Central Pharmaceuticals Ltd did not provide proper information to its shareholders in the financial statement for the fiscal year 2019-20, said its auditor recently.

As a result, the general investors could be misguided in making decisions regarding buying its shares, said some brokerage house officials.

Central Pharma is a listed company since 2013. That year, the company raised Tk14 crore through issuing 1.40 crore shares at a face value of Tk10 each. The price of its share was Tk12.90 each on Sunday at the Dhaka Stock Exchange.

Since getting listed in the stock exchange, the company has frequently been the subject of controversies and was much discussed among the investors.

Auditor's opinion

The auditor of the company said in the financial statement, the company has written off an inventory of Tk48 crore, but they did not provide supporting documents regarding the matter.

The auditor said the company claimed to have destroyed the inventory but did not provide any evidence of destruction. Also, the auditor was not informed before any such destruction done by the company. The value of inventory destroyed was charged in the cost of goods sold.

In the auditor's qualified opinion, they observed that the volume of inventories was high compared to the purchase, production capacity, cost of goods sold and turnover of the company as a whole and had been increasing year to year.

The auditor further said the management of the company has written off trade receivables of Tk58 crore but not provided supporting documents for it.

That is why the company incurred losses of Tk111 crore in the last fiscal year, according to the auditor.

As per the Auditor Opinion, advance tax of Tk28 crore and liabilities of tax Tk27 crore remain unadjusted in the accounts of the company. No supporting documents against payment of advance tax of Tk0.90 crore during the year 2019-2020 have been provided. As a result, assets and liabilities have been overstated.

Tajul Islam, company secretary of Central Pharma, said, "We have written off this money from balance sheet as per the rules."

"We incurred loss because our production had been stopped for more than three months," he added.

However, in the first quarter of this fiscal year, the company posted earnings per share of Tk0.08.

Dispute with the NBR

Demanding tax of Tk49 crore, the National Board of Revenue (NBR) froze three bank accounts of the company in the Janata Bank in 2018. Since then, the company has been running through cash transactions.

The company secretary said they were trying to resolve this dispute.

Confusion over ownership change

In 2017, Alif Group showed some interest in buying Central Pharma. Even though the company was not sold, speculation over a change of ownership pushed up Central Pharma's share price by 120%.

In March this year, Central Pharma's share price rose by 88% over rumours about change of ownership of the company.

The Bangladesh Securities and Exchange Commission has formed a committee in July this year to investigate the unusual movement of share price and trade volume of the company.

A senior officer of the securities regulator said their Enforcement Department is working on this issue.

Production status

In December last year, the Directorate General of the Drug Administration (DGDA) suspended the production license for the Central Pharma's drugs due to a factory defect.

As per the DGDA requirements, the company repaired the factory within three months.

Then the DGDA withdrew its suspension order in March this year. The pharmaceuticals company restarted production the same day the suspension order was lifted.

Tajul Islam said, "Our factory production is going on in full swing."

Complying with 30% shareholding rule

The Central Pharma's board of directors did not comply with the rule of holding 30% shares of the company jointly. The sponsors and directors together hold only 25.89% of the company's share.

As per the securities regulator's direction, Morsheda Ahmed, one of the directors of the company, has expressed her intention of buying 4.11% or 49.25 lakh shares of the company at prevailing market price through the stock exchange within the next 30 working days since 15 December.

At present the general shareholders of the company hold 61.66% share.