FAS Finance in immeasurable trouble

FAS Finance and Investment – a non-banking financial institution – has plunged into big trouble because of loan scams, particularly by controversial businessman Prashanta Kumar Halder, who is known as PK Halder.

Malek Siddiqui Wali, which audited the 2019 financial report of FAS Finance, said according to the report, the company's classified loans stood at Tk1,311 crore, which is 73% of its total loans.

A Bangladesh Bank investigation found that PK Halder had siphoned off Tk1,329 crore, after taking a series of loans from the company under different names between 2015 and 2017.

Halder is the sole beneficiary of Tk1,181 crore, 66% of the company's total loan and investments last year, according to the central bank.

Sources alleged that PK Halder and his accomplices took control of the company's board in 2014, taking out a series of bad loans that ultimately paved the way to the company's downfall.

According to its financial disclosure, the company has not paid a dividend to shareholders since its listing on the capital market in 2008.

International Leasing, another non-banking financial institution, incurred a loss of Tk2,800 crore in 2019 due to loan scandals allegedly by PK Halder, who is accused in several corruption cases.

Meanwhile, non-banking financial institution People's Leasing is in the process of liquidation following loan scams involving the same person. 

As per the Bangladesh Bank's rules, the company needed to keep provisioning of Tk514.55 crore against its bad loans.

However, it has kept only Tk134.59 crore in provision as the central bank provided the company with the facility to maintain the funds in installments over the next seven years.

The auditor said if the company had to maintain its entire provisioning, then the total loss in 2019 would be Tk530.96 crore and the loss per share would be Tk35.60.

Last year, the company overstated Tk120.35 crore as interest income from interest suspense loans.

Consequently, the loss for the year was understated by that amount.

If the interest income of the company is reduced by that amount, then the loss in that year would be Tk651.31 crore and net asset value per share would be Tk51.02 negative.

However, FAS Finance posted a Tk150 crore loss for the year that ended on 31 December, 2019.

Zahid Mahmud, company secretary of FAS Finance, told The Business Standard, "As directed by the Bangladesh Bank, we kept appropriate provisions against bad loans and other liabilities."

Sources said the company was run by Nitol Niloy Group.

Abdul Matlub Ahmad, chairman of the group, and his family members administered different activities of FAS Finance as nominated directors.

According to sources, corporate practice in FAS Finance was sound till 2012.

However, Abdul Matlub Ahmad and his family members later began veering away from this company. Finally, they sold all the shares of the company in 2014.

P&L International and Reptile Farm, which are allegedly responsible for the downfall of the company, bought the most shares of FAS Finance.

Both P&L and Reptile are owned by PK Halder, a fugitive in a case filed by the Anti-Corruption Commission (ACC).

As of 30 November, 2020, P&L International and Reptile Farm held 5.37% and 7.83% shares of FAS Finance respectively.

The paid-up capital of FAS Finance is Tk149.07 crore. Of the total shares, company sponsors and directors held 13.20%, institutional investors 13.28%, and general investors 73.52%.

Its share price was Tk5.80 each at the end of Wednesday's trading session at the Dhaka Stock Exchange (DSE).