Square Knit Composite has been accused of not using the money raised through the initial public offering (IPO) from the capital market properly. The regulatory body Bangladesh Securities and Exchange Commission (BSEC) is investigating whether the money has been misused regardless of the regulations.
It is learned that Square Knit Composite has raised Tk 150 crore from the capital market at the beginning of 2019 through book building method. With the money raised from the market, it was supposed to spend Tk 100.42 crore for the construction of the building and Tk 43 crore for the installation of machinery in the factory.
However, the company has been accused of not using the IPO money as per the rules. The commission decided to conduct a special inquiry in February to look into the matter. At the same time, Hawladar Yunus & Company was asked to submit the audit report to the commission within 30 working days for the special audit. The auditing body audited the matter and submitted the report to the commission. Several inconsistencies have been mentioned in the report.
Meanwhile, the new commission has called for further investigation into irregularities in the use of IPO funds of Esquire Net Composite. Following this, the commission has recently formed a three-member inquiry committee. BSEC Deputy Director is on the committee. Miraj Us Sunnah, Assistant Director. Bani Yamin Khan and Assistant Director Tohid Hasan.
According to BSEC sources, Messrs. Malek Siddiqui Wali, Chartered Accountants, an audit firm appointed by the company, did not comment on the financial report, despite various irregularities and inconsistencies in the use of Escrow Net Composite’s IPO funds. But the special auditor appointed by the commission, Messrs. Hawladar Yunus & Company Chartered Accounts, found several discrepancies in the financial report.
It is also learned that Esquire Knit has worked with the family company Pinnacle Construction Management Limited to construct the building at a cost of Rs 100 crore with the IPO money. Pinnacle board managing director of Square Knit Composite. Ehsanul Habib has two daughters. According to the International Accounting Standards (IAS), transactions with interested organizations have to be disclosed in the financial statements. But the company did not mention any issue in the financial report. The commission suspects that the company was constructing the building with a family organization for some nefarious purpose. Since then, the BSEC has appointed a special inspector to investigate the matter.