- Ring Shine Textile dubiously increased paid-up capital from Tk9.95cr to Tk285cr before IPO
- Pre-IPO shareholders took shares worth at least Tk52cr without paying any money
- The company's 2017-2020 financial statements did not reflect its actual performance
- The BSEC to take actions against the alleged parties
Ring Shine Textiles Limited issued shares to 11 of its sponsor-directors and 33 pre-IPO private placement shareholders without taking any money from them, reveals the Bangladesh Securities and Exchange Commission (BSEC).
Sources told The Business Standard that at least Tk52 crore remained unpaid by the pre-IPO shareholders of the company.
The underperforming textile mammoth that entered the stock market in 2019 through a Tk150 crore initial public offering (IPO), one of the largest from the textile sector, had increased its paid-up capital from less than Tk10 crore to over Tk285 crore before it headed to the stock market.
In a statement issued on Thursday, the BSEC said the jump in the pre-IPO paid-up capital was due to the company's issuance of ordinary shares at face value of Tk10 under private offer to its sponsor-directors and 73 external local shareholders.
Among them, 11 sponsor-directors did not pay any money, while the same ugly truth was revealed in the case of 33 of the external investors.
BSEC Executive Director Rezaul Karim said the regulator has frozen all the shares of the said sponsor-directors and external investors.
In May this year, the regulator announced that the shares issued for free would be dissolved and the company's paid-up capital would come down.
The parties involved in the crime would be brought under legal measures for violating the securities laws and the anti-money laundering laws, the BSEC said.
"The matter is sent to the BSEC's enforcement department to follow the due procedure that includes hearing and action," Reza said.
In Thursday's statement, the BSEC said, "The company's published statements did not reflect the true and fair view of its actual financial performance."
However, the regulator, after going through a change in its top positions last year, has reconstructed the board of the misgoverned listed company and the new board of directors partially resumed its production to offer investors some hope.
Faking paid-up capital before an IPO has emerged as a concern among investors in recent years until the Financial Reporting Council (FRC) stopped the means for doing that last year.