Premier Leasing fails to keep provision properly: Auditor

Premier Leasing and Finance Limited, a non-bank financial institution (NBFI), could not maintain its required provision properly in 2020, its auditor said in its financial statement.

It said the firm's outstanding loan was Tk1310.38 crore – Tk9,38.36 crore classified and Tk372.02 crore unclassified, as per a stock exchange disclosure.

The NBFI maintained a provision of Tk159 crore against the Tk466.14 crore required, leaving the shortfall at Tk307.14 crore.

But on 30 June 2022, its total outstanding stood at Tk1,325.86 crore – classified Tk919.46 crore and unclassified Tk406.41.02 crore.

Against the loan, the required provision stood at Tk414.60 crore but the NBFI maintained just Tk107.92 crore. That means the provision shortfall stood at Tk310.68 crore.

As per the latest status, the finance company has lost its capacity to maintain provisions.

The auditor has also mentioned a shortfall of Tk600 crore in the provision made during the year. The Capital Adequacy Ratio of the company stood at 41.71% negative.

This represents the entity's heavy dependence on liquid assets funded from external sources and increases the company's operational risk.

Moreover, this causes material uncertainty to exist in the company's ability to continue as a going concern.

Since a negative capital Adequacy Ratio implies that the company may not have sufficient capital to handle a certain amount of losses and expose the entity to higher insolvency risk.

According to the financials report for the year that ended in December 2021, its negative earnings per share (EPS) stood at Tk18.44 and negative net asset value (NAV) of Tk5.79. The net profit after tax stood at a negative Tk245.16 crore.

The company has maintained a gratuity fund for the employees in line with Bangladesh Labour Act 2006. But it has yet to receive approval for the fund from the National Board of Revenue (NBR).

The company has yet to incorporate the Workers' Profit Participation Fund.