JMI Hospital and Requisite Manufacturing Limited reported more than two times profits for the third quarter of fiscal 2021-2022.
But the medical equipment provider did not clarify the sudden growth to its investors, which is a violation of the securities rules, said sources in the stock market regulator.
A senior officer at the Bangladesh Securities and Exchange Commission (BSEC) said as per the corporate governance code, a quarterly financial report should explain an abnormal increase or decrease in the profit of a company.
Companies will publish explanations in price-sensitive information statements and inform investors through stock exchanges and the media. And if this law is violated, the commission will be able to take action against the company concerned, he added.
The official said, "JMI Hospital had shown an unusual growth in profits in the January-March quarter of FY22. But it did not explain the reason for the increase. Which could mislead general investors. So, the matter will be investigated."
A top official at a brokerage firm said on condition of anonymity that the BSEC has enacted a law to ensure good governance by providing accurate information to the stock market.
"But most companies do not comply with this law. The main reason is that the BSEC did not take disciplinary action against anyone for violating this law," he added.
The official also said no investor company's financial report reveals the reason for the increase in profits. Again, many companies do not publish financial statements in detail. This gives share manipulators a chance to spread rumours.
The share trading of JMI Hospital on the Dhaka Stock Exchange (DSE) started on 31 March. The price rose by 270% from Tk20 each share in the month following the start of trading.
Then it decreases a bit. However, after the release of the company's third-quarter report on 27 April, its share price rose 40% to a maximum of Tk97. However, its shares are currently trading at Tk79.50.
The company's Chairman Abdur Razzak, who is currently travelling abroad, could not be reached for comment. Meanwhile, Company Secretary Safiqur Rahman declined to make a remark on this matter.
According to JMI Hospital's financial report, its revenue rose 18% to Tk47 crore in the January-March quarter and operating profit rose 16% to Tk12.20 crore. But, its profit after tax has increased by 230% to Tk14.46 crore.
The company's profit rose at an unusual rate as Tk6.95 crore was added to the balance sheet mainly from deferred tax liability.
Deferred tax liability is a listing on a company's balance sheet that records taxes that are owed but are not due to be paid until a future date.
This means that the company has accumulated more money as deferred tax than the prescribed tax. So, extra money was added to the balance sheet in the said quarter.
The BSEC had earlier rejected the company's initial public offering (IPO) application due to irregularities in the financial report. The company later rectified the mistakes and re-applied for IPO approval.
The company raised Tk75 crore by issuing shares under the book-building method. For this, it issued shares at Tk25 each to institutional investors and Tk20 to general investors.