BSEC committee to probe Sonali Paper’s asset revaluation

The Bangladesh Securities and Exchange Commission (BSEC) has formed an inquiry committee to look into the anomalies regarding the fixed assets and financial statements of Sonali Paper and Board Mills Ltd – a concern of the Younus Group.

Back in 2016, the company had its assets revalued by SH Khan & Co Chartered Accountants. And, in February last year, the BSEC appointed Aziz Halim Khair Choudhury & Co Chartered Accountants as a special auditor to review the company's financial statements for the fiscal years 2019-20 and 2020-21. 

Now, the newly formed committee, consisting BSEC Executive Director Md Saifur Rahman, and Directors Md Abul Kalam and Sheikh Mahbub Ur Rahman, will go through the reports by both the auditors. 

BSEC Commissioner Dr Mizanur Rahman said the inquiry committee will probe the irregularities that were found by the previous auditors. 

Auditors' findings

According to the audit report by Aziz Halim Khair Choudhury & Co Chartered Accountants, Sonali Paper overstated the value of its land by Tk200 crore in its FY20 and FY21 financial statements. As a result, its net asset value increased by 65% in FY20 and by 63% in FY21. 

Also, costs of raw materials, spare parts, maintenance and repair works, and borrowings were shown as assets instead of expenditures in the financial statements of the said fiscal years. Hence, the company's profit figures in FY20 and FY21 inflated by 117% and 35% respectively. 

The company even diverted the Tk22.5 crore loan it took for its working capital, to the stock market, which is a violation of the anti-money laundering act, according to audit findings. 

Sonali Paper showed a total revenue of Tk282.3 crore for the two fiscal years, but the special auditor could not confirm the figure because the company did not maintain its sales records properly. 

In 2016, SH Khan & Co Chartered Accountants revalued the company's assets. The value of its 1,150 decimal land in Narayanganj, which the company bought several years ago, was Tk1.13 crore. But according to the auditor's calculations, the land was valued at Tk45 lakh per decimal, which makes the total value of the land Tk517.5 crore. 

BSEC deemed that the valuation done by SH Khan & Co overstated and influenced shareholders' equity and Sonali Paper's net asset value, which is why the commission then appointed a special auditor at the company. 

A big portion of the company's revenue came from its capital market investments. 

In the July to September quarter of the ongoing fiscal, its revenue stood at Tk46.66 crore and net profit at Tk23.14 crore.

Sonali Paper & Board Mills was incorporated in 1977, and got listed on the Dhaka Stock Exchange in 1985 and Chittagong Stock Exchange in 1996. Younus Group took over the company after buying all of its shares in 2006.

It manufactures media, liner, simplex, duplex paperboards, and quality papers such as newsprints.