Bangladesh Securities and Exchange Commission (BSEC) has rejected the application of Bonito Accessories to raise money from the capital market through an initial public offering (IPO).
The BSEC investigation has uncovered multiple frauds, including overvalued financial reports. BSEC sent a letter to the company and issue manager on Monday (August 18).
According to sources, the company has violated the rules and overvalued its financial statements, making investors more interested in buying its shares. Meanwhile, the company did not buy the land where the building will be constructed using the IPO money. BSEC feels that the company has falsified its report to raise money for the IPO.
The company has increased sales in its financial report from 2015-16 to 2018-19. As a result, the company’s future profit will be reduced, said BSEC. In June 2016, the company’s share capital was Tk one crore. It has increased its share capital to Tk 40 crore in a short span of time to reach the public quickly. However, the company did not use the entire capital under the private offer.
Subsequently, the company applied to the commission for raising Tk 30 crore through an initial public offering (IPO). In that case, the commission failed to submit the pre-IPO collaborative documents. The company has shown that it has a long-term bank loan of Tk 2.26 crore and cash of Tk 1.8 crore. But the company has shown in the IPO application to repay the loan of Tk 3 crore.
The BSEC noticed that the company had increased its operating income by reducing operating costs. Besides, the combined amount of administrative expenditure and distribution expenditure was Tk 1.6 crore till June 30 last year. But the company’s revenue was Tk 45.61 crore. At the same time, the company paid Tk 2.21 crore to all its directors and officers. The net income ratio of the company is shown as 11.04%, which is higher than the average of the textile sector.
According to BSEC sources, the company has failed to provide accurate information on all matters in the audited financial report. The company will soon have a significant impact on its profits from the Covid-19 epidemic, which could also put shareholders at risk. Bonito Accessories Industries is a manufacturer and exporter of 100% export oriented garments accessories.