The Bangladesh Securities and Exchange Commission (BSEC) has recently rejected the Initial Public Offering (IPO) applications of three companies.
The companies are PEB Steel Alliance Ltd, Achia Sea Foods Ltd and Union Insurance Company Ltd.
Besides, Meera Agro Inputs Ltd – a small-cap company – withdrew its IPO application last week.
BSEC officials said the companies did not comply with the Public Issue Rules and Companies Act-1994.
They also violated rules while preparing their audited financial statements, which were submitted with the IPO application, the securities regulator said.
Related issue managers claimed that the problems identified by the BSEC are solvable but the securities regulator rejected their applications all together. So these companies have to apply again.
PEB Steel Alliance
On October 21, 2018, PEB Steel Alliance Ltd applied to BSEC for raising Tk15 crore as capital by issuing 1.50 crore ordinary shares in the capital market.
The company wanted to procure machinery, expand its factory and repay bank loans with the raised capital.
BSEC sources said the company did not comply with the International Accounting Standard-16 while preparing the financial statements. Specifically, the company did not evaluate property, plant and equipment depreciation as per the rules.
The company also violated the Companies Act 1994 by not referring to its foreign branch's information in the audited financial statements.
PEB Steel Alliance specialises in design, fabrication, and erection of pre-engineered steel buildings for factories, warehouses, showrooms, commercial, trade centers, supermarkets, sports stadiums, exhibition halls, and aircraft hangars, etc.
Achia Sea Foods
Achia Sea Foods Ltd submitted an application to the BSEC to issue 2 crore ordinary shares at face value for raising Tk20 crore as capital. It wanted to procure machinery and equipment, develop land and repay bank loans with that fund.
The company could not submit the valid certificate from the Department of Environment and some other necessary documents.
Achia is a shrimp producer in the frozen food processing industry of Bangladesh. It was launched on December 27, 1993 as a private limited company.
Union Insurance Company Ltd applied to the securities regulator for raising Tk16 crore capital by issuing 1.60 crore ordinary shares in the capital market.
The company aimed to invest in FDR (fixed deposit receipts), in the capital market and purchase floor space.
But the insurance company's present paid-up capital is Tk25.55 crore and its proposed IPO size was Tk16 crore, which would have resulted in a post-IPO paid-up capital amounting to Tk41.55 crore. This does not comply with the amended Public Issue Rule 2019.
According to amended rule, a company's offer has to be at least an amount equivalent to 10 percent of its paid-up capital or Tk30 crore at par value – whichever is higher – provided that post-IPO paid-up capital shall not be less than Tk50 crore.
"Recently we submitted the application to the securities commission with relevant documents. But till we did not get any letter about this matter," said Emam Hossain, Union Insurance's issue manager and managing director of Sonar Bangla Capital Management.
Union Insurance Company Ltd was launched in Bangladesh as a public limited company on August 24, 2000.
The company's principal products and services are insurance for fire accidental damage on property, marine cargo, motor, liability and engineering projects.
Meera Agro Inputs
The Meera Agro Inputs Ltd, a seed processing company, applied to the securities regulator for raising capital Tk5 crore through Dhaka Stock Exchange's small-cap board by issuing 50 lakh ordinary shares.
The company wanted to utilise the fund for land development, working capital and business development of its existing projects.
But the company submitted a fake audit financial statement to the regulator, claimed a DSE source.
Before the securities regulator's action in this regard, the company has withdrawn its Qualified Investor Offering (QIO) proposal from the BSEC.
Meera Agro sells seeds of rice, maize, cauliflower, cabbage, carrot, bitter gourd, tomato, watermelon, cucumber, chili, kohlrabi, and radish in the local market.