BSEC smells revenue manipulation at Pacific Denims

The Bangladesh Securities and Exchange Commission (BSEC) has smelled revenue manipulation at Pacific Denims Ltd as the market regulator suspects that the apparel manufacturer has been showing inflated sales for years.

"The commission has set up a three-member panel to look into the financial statements of the company. If any irregularities are found, then action will be taken against the company," a senior BSEC official told The Business Standard on condition of anonymity.

"The commission sees the company's stellar revenue in the last few years as unbelievable," he added.

According to BSEC officials, the company failed to generate its expected profit based on its revenue. Besides, investors have not received expected dividends and returns from the company since its listing on the stock market.

The commission also sought relevant documents from the company for review.

Pacific Denims Limited, which is involved in manufacturing, dyeing, weaving, and finishing denim fabrics, was incorporated in 2003 and got listed on the bourses in 2017.

Seeking anonymity, a BSEC official said the revenue of the company has been decreasing gradually since its listing on the bourses.

The firm declared a 1% cash dividend for its shareholders in the last fiscal year.

He added that the commission also suspects the company could not use its initial public offering (IPO) funds properly.

"In the interest of investors, the commission has taken the initiative to investigate the whole affairs of the company," he went on.

The official said that the market regulator also sought bank statements, documents of IPO fund utilisation, letter of credit (LC) opening statements, and relevant papers for ascertaining the real revenue of the company.

In 2017, the company raised Tk75 crore from the capital market to repay loans, construct buildings, and purchase machinery for business expansion.

Regarding BSEC's suspicion, a top official of the company said, "We procure raw materials locally and globally."

The official said the company could not achieve a net profit in terms of revenue due to inflation. For these reasons, the company has recommended lower dividends in the last two years.

"Recently, a BSEC team visited our factory and observed all the issues. The factory is in operation in full swing. The commission has sought documents on many issues. We are working hard to provide the documents," he added.

The official said the company has utilised the IPO funds as per the declaration made in the prospectus. And other loans from the company that were taken before listing are already resolved.

From October to December 2022, the revenue of the company stood at Tk36.62 crore, which was Tk40.60 crore in the same period of the previous year.

Its net profit plunged by 56% to Tk83 lakh compared to Tk1.93 crore in the same period a year ago.

Its earnings per share stood at Tk0.05 and the net asset value per share stood at Tk13.66.

The company has recommended a 1% cash dividend for its shareholders for fiscal 2021-22.

Its paid-up capital is Tk183.55 crore and its authorised capital is Tk200 crore.

As of 31 December 2022, of the company's total shares, sponsors and directors held 30.12%, institutional investors 13.06% and general investors 56.82%, respectively.

On Tuesday, each share of the company ended at Tk9.90 on the Dhaka Stock Exchange.