The Bangladesh Securities and Exchange Commission (BSEC) has rejected applications for initial public offerings by two more companies.
Gardenia Wears Ltd, an export-oriented woven garments manufacturer, wanted to go for an initial public offering (IPO), while Nialco Alloys Ltd, which produces high-grade bronze and brass ingots, sought to go for qualified investor offering (QIO).
QIO means offer of securities by an issuer to qualified investors to be listed with any exchange in the small capital platform.
MTB Capital Ltd was the issue manager of both the companies.
The regulator had earlier rejected the IPO applications of six other companies – Beka Garments and Textile, JMI Hospital Requisite Manufacturing, SF Textile Industries, B Brothers Garments Co, Bonito Accessories Industries and BD Paints – for showing inflated revenues and profits.
It was found that most of these companies had inflated their revenues and profits, and overstated inventories and assets in their financial statements.
On Thursday, the stock market regulator wrote to both the companies and their issue manager in this regard.
BSEC sources said Nialco Alloys will be able to submit a fresh application again.
Up to now there has been no application by any companies for QIO in the country's stock exchanges.
So far only three companies had applied to the BSEC for qualified investor offers. But, two of them withdrew their applications later.
The small capital companies' board started its journey on April 30, 2019. Finance Minister AHM Mustafa Kamal inaugurated the board.
Also, issue managers are not interested in bringing small capital companies to the market as they pay low fees, sources said.
They said rules for small capital companies should be short and simple. Small entrepreneurs are not as capable as listed companies to comply with all of these rules.
The main activity and the nature of the business of Nialco Alloys are manufacturing high-grade bronze and brass ingots.
The company wanted to raise Tk10 crore from the capital market through the fixed-price method to acquire machinery and repay bank loans.
BSEC sources said MTB Capital has been performing as issue manager of the company, which is a sister concern of Mutual Trust Bank Ltd.
From the proceeds, it appears that the company will repay a bank loan of Tk3.22 crore to Mutual Trust Bank.
It appears that the issue manager is connected to the aforesaid issue and violated the BSEC (Qualified Investor Offer by Small Capital Companies) Rules 2018.
The auditor gave a qualified opinion that the valuation of inventory of the financial statements as of June 30, 2019 and December 31, 2019, has not been properly presented.
According to accounts as of December 31, 2019, the inventories have been increased to Tk29.98 crore from merely Tk4.82 crore just in the last six months.
Gardenia Wears Ltd is a 100 percent export-oriented woven garments factory. The company produces and exports different types of readymade garments.
The company wanted to raise Tk20 crore from the capital market through the fixed-price method to acquire machinery, construct a building, develop a plot of land and purchase furniture and electrical equipment.
Sources said the company's auditor was Ahmad and Akhtar Chartered Accountants which has already been dropped from the BSEC auditors' panel.
The regulator had earlier told the company to change the auditor and resubmit accounts as of June 30, 2020 of the company to the commission.
But the company did not submit accounts audited by a new auditor. Besides, the company did not mention any timeframe to submit the accounts to the commission.