Regent Textile Ltd collected Tk125 crore from the share market in 2015 to renovate its factory and start a new ready-made garment (RMG) project. But the RMG project has not been completed even after five years.
Though the company claims that it has completed the renovation, there is no visible sign of progress in the use of the Initial Public Offering (IPO) fund.
In August 2018, Aman Cotton Fibrous Ltd collected Tk80 crore from the share market to buy new machinery and repay its loans. Till now the company has repaid only a part of its loans and has not yet set up any new machinery. Around Tk72 crore of the IPO fund is still unused.
Like Regent Textile and Aman Cotton, several other companies have also not been using investors' money as intended.
Professor Abu Ahmed, a capital market analyst, told The Business Standard, "No listed company has the right to misuse the money taken from investors. But the fact is some companies are doing this."
He said, "The BSEC (Bangladesh Securities and Exchange Commission) is responsible for monitoring the companies' IPO fund use. They are not doing enough to implement the laws."
Mahbub H Majumder, managing director of AFC Capital Ltd, said, "The regulators have strict laws about the use of money collected from the capital market. But some entrepreneurs are not obeying the laws."
He added that the regulators are being soft on the responsible companies.
Regent Textile wanted to complete the BMRE (balancing, modernisation, rehabilitation and expansion) in 12 months, and the RMG project in 18 months. The initial deadline expired on December 19, 2016.
After that, Regent Textile extended the deadline for the first time on October 31, 2017, then for the second time on October 31, 2018, the third time on June 30, 2018, and the last time on June 30, 2019.
The company has still not used 36.41 percent of the IPO money. In this period the company got Tk32 crore as interest from the total fund.
The initial deadline for the IPO utilisation of Aman Cotton expired in August 2019. The company has used only Tk7.76 crore, which is only 8.77 percent of the total fund. The company is still to repay 53 percent of its loans.
However, the company has mentioned in its utilisation report that all the loans have been repaid.
There is also an allegation that the company has provided the money as security for another company of the group for taking loans.
So far, the company has earned Tk 4.68 crore as interest from the IPO fund.
According to information published by the Dhaka Stock Exchange on November 30, 2019, the IPO utilisation deadline for Intraco Refuelling Station Ltd expired in August 2019. The company is yet to utilise 77 percent of its total fund of Tk30 crore.
The IPO utilisation deadline for Pacific Denims Ltd expired in February 2019. Though the company has extended the initial deadline, it is yet to utilise 27 percent of its total fund of Tk75 crore.
SK Trims and Industries Ltd has utilised only 46 percent of its total fund of Tk30 crore. Its IPO utilisation deadline ended in December 2019.
Queen South Textile's initial deadline to use Tk15 crore IPO fund expired in October 2019. Though it extended the deadline, it is still to utilise 54 percent of the total fund.
Alif Manufacturing Company Ltd collected Tk109.40 crore from the right share. The deadline for utilisation ended in December 2019. But the company is still to use 32 percent of the total money.
Bangladesh Thai Aluminium Ltd could not utilise Tk52.33 crore in due time.
Ifad Autos Ltd failed to utilise Tk124.38 crore within the deadline. Around 11 percent of the fund allocated for the assembling unit of the company is yet to be utilised.
What the companies are saying
Officials of these companies say they have extended the deadline for their IPO utilisation, and hope to complete the remaining work within the extended period.
Anjan Kumar Bhattacharya, the chief financial officer of Regent Textile Mills, said, "The company is facing numerous challenges because of the current situation in the RMG sector. For this reason, it was not possible to implement the new RMG project on time."
Masum Rana, company secretary of Queen South Textile Mills Ltd, told The Business Standard, "We need another six months to complete the whole work. The general shareholders have approved the six-month extension application at the Annual General Meeting."
Md Sorhab Ali, company secretary of Pacific Denims Ltd, said, "We submitted an application for time extension to the securities regulator, and we hope that the utilisation of the proceeds will be completed on time."
GM Salah uddin, company secretary of Intraco Refueling Station Ltd, told The Business Standard, "The board of directors has decided to change its earlier decision with regard to the utilisation of the IPO proceeds. Earlier, the decision was to establish a bottling plant at Patenga, Chattogram."
"Now they have decided to buy a newly-built LPG cylinder manufacturing factory at Sadar Dokkhin, Comilla. The utilisation process has been delayed for this reason."
The regulators' stance
According to the BSEC's public issue rules, the proceeds should not be used for any purpose other than those specified in the prospectus without valid ground.
Any material deviation in this respect must have the prior approval of at least 51 percent of the public shareholders.
Mizan Rashid Chowdhury, president of Bangladesh Capital Market Investors' Unity Parishad, urged the regulators to take back the IPO funds from companies which have been squandering away the money of the investors.
He said they are not using the money to expand their business. By this, they are cheating the investors.
"It is a pity that these companies are not being punished. The shares of the companies have dropped below the issue price, and should be bought back after implementing share buyback rules," he added.
The prolonged downward trend in the country's capital market is bewildering investors.
In the last one year, the market capital of Dhaka Stock Exchange (DSE) decreased one lakh crore taka. On January 14, 2020, the prime index of the DSE reached 4,036 points. The index has declined 1,800 points in a year.
Md Saifur Rahman, executive director and spokesperson of the BSEC, said, "The enforcement division of the BSEC will take action against any company that breaks the rules of IPO fund utilisation."
He said the regulators can do nothing if the investors approve the proposal to extend the deadline of IPO utilisation.
The regulators are not reluctant to implement the laws, he added.