Bangladesh Securities and Exchange Commission (BSEC) is in discomfort after Familytex (BD) Ltd turning into a junk company in just around seven months of approving the company’s initial public offering (IPO).
Immediately after the listing, the company has been degraded as Z-category (poor performing one) by the stock exchanges due to its failure in giving any dividend to its shareholders for the year 2012.
The poor performance within short span of time from BSEC’s nod to go public has raised question about the capacity of the regulator, issuer and issue manger in scrutinising the financial health of the companies and their future prospect, analysts say.
“It’s a matter of concern,” said a top official of BSEC.
The regulator lacks adequate manpower to look into the company’s financial statements thoroughly, sources said.
Following bourses’ downgrading the company, the regulator served a notice to Familytex for breaching securities rules by declaring dividends before the listing and asked to reply in three working days.
In response, Familytex said it had only approved the draft audited financial statement for the year 2012. “But no decision on dividend was made in its board meeting held on July 23. The company had only sought advice from the DSE and CSE regarding dividend declarations,” the letter reads.
But both the bourses refuted the statements saying they have enough documents to quash it (company’s reply).
“We have proper documents regarding dividend declaration of the company,” said a DSE top official.
According to the Company Act, agenda for dividend declaration on annual general meeting of a listed company is a must. Familytex has already held its AGM on August 4, he said.
Echoing DSE, CSE management also binned Familytex statements.
“We have enough documents to prove wrong the statement of the company,” said CSE chief executive officer Syed Sajid Hossain. “Familytex informed us that it had taken no decision on dividend for 2012. After that we have decided to downgrade the company as per the listing rules.”
On the debut trading day on June 18, the bourses in their website said the board of directors of Familytex decided not to issue any dividend for its shareholders for the year ended on December 31, 2012, prompting it to degrade the company.
The company had taken a decision regarding dividend declarations on April 29 before being listed on July 18. “This is clearly violation of securities rules,” said Saifur Rahman, BSEC executive director.
BSEC approved Familytex to go public on January 22 this year to raise Tk340m by offloading 34m ordinary shares at an offer price of Tk10 each.
Companies like Familytex have turned poor perfuming ones soon after listing, which is not good news for the market as well as investors, said a market expert, on condition of anonymity.
He said the responsibility goes to regulator, issuer and market intermediaries, including issuer and underwriter.
Before applying for any IPO, he said, an issue manger from the point of their responsibility entrusted by the regulator should screen out the company’s eligibility for going public.
Before the IPO process of Familytex, Abdul Kader Faruk was its chairman. Later, he resigned from chairmanship of the company to make the IPO approval process smooth.
During the time, Faruk was the managing director of RN Spinning Mills and faced music from the securities regulator on fraud charges in October last year as the company provided false documents for getting approval to rights share.
According to the half-yearly report of the company, it made a net profit after tax of Tk453.5m, an increase of about 71% over the same period a year ago.
