Special Correspondent: Listed company Kattali Textile Limited has been accused of “squandering” funds raised through an initial public offer (IPO). Such information has come out in the report of the investigation committee formed to investigate this complaint. Therefore, the Bangladesh Securities and Exchange Commission (BSEC) has directed the Bangladesh Police Criminal Investigation Department (CID) to take necessary action against the company as per the Prevention of Money Laundering Act.
Meanwhile, the report of the investigation committee formed by BSEC has been sent to CID. CID will take necessary steps in view of the BSEC directive.
Recently, a letter in this regard has been sent to the Additional Inspector General of CID, according to reliable sources.
In the letter sent to the CID, the BSEC mentioned that a three-member investigation committee was formed by the Bangladesh Securities and Exchange Commission on October 16, 2023 to look into the use of IPO money of Kattali Textile Limited and other issues. The committee submitted its investigation report to the Commission on 16 February 2024.
The letter also mentions that the Bangladesh Securities and Exchange Commission has decided to send the Criminal Investigation Department (CID), Bangladesh Police to take action against Kattali Textile Limited under the relevant section of the Prevention of Money Laundering Act, 2012. Therefore, the matter has been directed to take action under the relevant section of the Prevention of Money Laundering Act, 2012.
According to data, Kattali Textiles Limited had raised Tk. 34 crore through initial public offering (IPO) in 2018. But after five long years, the company failed to utilize the IPO funds. The company raised Tk 34 crore from the stock market to purchase capital equipment, repay bank loans, install electrical transformers and bear IPO expenses through IPO funds. The company was supposed to utilize the fund by October 2020. But till January 2023, the company has utilized only 16 crore 84 lakh taka of the IPO funds.
BSEC formed a three-member committee on October 16, 2023 to investigate the company’s failure to use IPO funds. The members of the formed committee are BSEC Additional Director Mohammad Golam Kibria, Deputy Director Md. Shahidul Islam and Dhaka Stock Exchange (DSE) Assistant General Manager Masud Khan.
Allegations against the company:
Kattali Textile is one of the most talked about companies in the stock market. The issue of raising IPO funds was quite controversial. Some investors complained that the company was relying on rental income from its factory building in Chittagong instead of leveraging its business operations. Later the company failed to utilize the IPO funds properly on time. As a result, the company could not implement its business expansion program on time. In view of which the investors are deprived of their expected returns.
Meanwhile, the investigation committee formed by BSEC has examined the financial statements of the company and the overall business activities to investigate the allegations of failure to use the IPO funds. There is evidence that the company’s IPO money was raised to nine-sixth.
Earlier in July 2020, the BSEC fined the managing director of Kattali Textiles taka 1 crore and directors other than individual and nominee directors taka 50 lakh each for failure to utilize IPO funds. Therefore, this time BSEC has given responsibility to CID without taking action against the company as per the Securities Act.
