The securities regulator has appointed a special auditor to investigate the use of initial public offering (IPO) proceeds and audited financial statements of Aman Cotton Fibrous Ltd for the year ended on June 30, 2019.
Listed on both bourses, the company failed to use its IPO proceeds within the scheduled period. It may also have given loans to a sister concern without approval from general investors, the Bangladesh Securities and Exchange Commission (BSEC) suspects.
As a result, investors of the company have been deprived of gains and lost a lot of capital.
Back in August 2018, Aman Cotton Fibrous Ltd collected Tk80 crore from the share market to buy new machinery and repay its loans.
However, till now, the company has only repaid its loans. It has yet to buy any new machinery, leaving around Tk72 crore of the IPO funds unused. The company had previously declared it would complete all the work within 12 months of obtaining IPO funds.
Furthermore, Aman Cotton has also not paid back loans to creditor company Union Capital Ltd within schedule.
There are allegations that a loan facility has been given to a company of the Aman Group by a lien, which if true, would be a gross violation of trust as well as the regulations.
In the last audited financial statement, the company showed Tk25.49 crore as loans to its sister concerns.
The securities regulator suspects that the company has given loans to its sister concerns without approval of shareholders.
According to the BSEC directive, an issuer company cannot give out loans, guarantees or securities without approval from its board of directors and the shareholders at an annual general meeting.
Howladar Yunus & Co will complete the special audit within 30 days.
The securities regulator fixed the audit firm's fee at Tk4 lakh as per the quotation. The firm will receive payment after submitting the special audit report on time.
The BSEC also asked the managing director of the company to cooperate with the auditor.
BSEC Executive Director and Spokesman Md Saifur Rahman told The Business Standard that a letter might be issued to appoint the special auditor.
Chartered accountant firm Shafiq Basak and Co has been regularly auditing IPO projects of Aman Cotton Fibrous Ltd.
The Business Standard tried to reach out to Aman Cotton's company secretary for a quote, but he did not answer any of the phone calls.
The board of directors of Aman Cotton recommended a 10 percent cash dividend for the financial year ended on June 30, 2019. Earnings per share of the company was Tk2.11 and the net asset value per share stood at Tk42.76 at the time.
Over the last year, the company's net profit was Tk20.48 crore, which was Tk5.27 crore less than its profit in the previous year.
The company manufactures 100 percent cotton carded, combed and semi-combed, ring-spun grey yarn for knitting as well as weaving.
The company went into commercial production on November 1, 2007. The last trading price of each share of the company at the Dhaka Stock Exchange was Tk18.60.
Aman Cotton was listed on both the stock exchanges in 2018.