BSEC appoints 2 independent directors for Keya cosmetics

The stock market regulator has appointed two independent directors for Keya Cosmetics Ltd in a bid to revive the business and protect the interest of investors.

The Bangladesh Securities and Exchange Commission (BSEC) made the appointments last week.

The commission had earlier sought some documents and explanations from the company as it suspected that the company's financial statements were misleading investors.

BSEC also sought a clear explanation of its trade receivables, inventory and suspicious debts for 2018, 2019 and 2020.

In addition, the commission sought an explanation of the assets, liabilities and capital of Keya Spinning, Keya Cotton and Keya Knit Composite – three other companies under the holding of Keya Cosmetics Limited.

Keya Group is an example of how a business can grow fast in Bangladesh and fall at an even faster pace.

Abdul Khalek Pathan, a professional driver turned entrepreneur, founded his detergent and soap business in the 1990s, which grew to the top tier in the local market alongside achieving export trophies in the early 2000s when the business got listed on the stock market.

It expanded to the export-oriented textile and apparel business seriously and also achieved success there.

But, aggressive financial planning, misreporting of assets and liabilities, and the amalgamation of troubled assets with the listed company altogether resulted in the fall of the once-a-glorious entity.

Keya Cosmetics Ltd, which owns the group's soaps and detergent business alongside most of the textile units, had absorbed an asset meltdown in fiscal 2018-19 since the accounting regulator ordered the company to write off fake assets amounting to over Tk1,000 crore.

Due to a one-off annual loss bigger than its paid-up capital, Keya Cosmetics' net asset value came down to near zero, which saw a slight improvement with some profits posted for fiscal 2019-20. Thereafter, the company did not publish any more financial statements.

Keya's shares closed at Tk7.60 each on Sunday at the Dhaka Stock Exchange (DSE).

According to the country's premier bourse, the sponsors and directors hold 46.27% shares in the company, whereas institutional investors have 8.70% and the general investors have 45.03% shares as of February this year.