Securities regulator finds anomalies in Golden Harvest’s use of funds 

Highlights

• The company is using the right share fund through its subsidiary
• There is a mismatch in figures between the remaining amount of money and bank statements
• It had Tk31.55 lakh net profit in Q3, 2020
• The company had Tk0.04 EPS in the same period

The stock market regulator has sought documents and explanations from Golden Harvest Agro Industries about its utilisation of funds it had collected from investors by issuing right shares.

In 2019, the company raised Tk89.93 crore by issuing 8.99 crore right shares for business expansion.

Sources said the company paid Tk1.11 crore to Braintrain Studio Ltd and Tk8.91 crore to Max Trading Ltd for its infrastructure development.

The Bangladesh Securities and Exchange Commission (BSEC) has found that the same person holds the post of managing director at both Golden Harvest and Braintrain Studio.

That means the payment between the companies is known as a related party transaction, which is permissible only upon approval by investors. However, the company made the transaction without following due process.

Asked about the related party transaction, an official of the company did not comment.

According to the fund utilisation report, Golden Harvest has yet to use Tk34.61 crore, but bank statements show it has only Tk11.62 crore in hand.

As per the cash flow statement, the company paid Tk41 crore as advance finance to contract farmers, a sister concern and others, said sources.

For these anomalies, the regulator has sought the trade licences of vendors, as well as: tender evaluation, purchase committee, board approval, and related compliance reports.

The regulator also sought an explanation about bank statements regarding the remaining amount of funds and advance finance.

In the third quarter, the company paid Tk38.61 crore in finance costs, which was Tk31.96 crore in the same period of the previous year. However, the company has already repaid a loan of Tk29 crore from the right share offer fund.

An official of Golden Harvest said, "We have paid advances to the vendors who are working and supplying raw materials."

In October 2019, the company got approval from the regulator to offer right shares.

It offered right shares at a ratio of three right shares for existing four shares at a face value of Tk10 each.

Golden Harvest Agro Industries was listed on the country's two stock exchanges in 2013.

In the first nine months of the financial year 2019-20, the company's net profit was Tk15.88 crore, which was Tk19.60 crore in the corresponding previous period.

During the period, the earnings per share (EPS) was Tk0.60, which was Tk0.86 in the same previous period.

But the company's net profit and EPS fell drastically in the third quarter of the last financial year.

In this period, the company's net profit was Tk31.55 lakh – which was Tk9.75 crore in the same period of the previous financial year – and EPS dropped to Tk0.04 from Tk0.40.

Sponsors and directors now hold only 32.88% of the company's shares, with institutional investors holding 40.37%, foreign investors 0.23% and general investors 26.52%.