18 listed firms still have Tk863cr unused IPO funds

TBS Infographic

Eighteen publicly listed companies have yet to utilise Tk863 crore, which they had collected from the capital market through the issuance of new shares for business expansion and projects between 2011 and June 2024.

In the last 13 years, 132 firms raised a total of Tk10,402 crore through Initial Public Offerings (IPOs) and Repeat Public Offerings (RPOs). 

While 114 of these companies fully utilised Tk9,539 crore for their intended purposes, the remaining 18 firms have not met their commitments to investors, as outlined in their prospectuses.

Stock exchange reports state that several of these firms had extended the timeframe for using the funds allocated to their projects, leading to the non-fulfillment of their commitments to investors. However, many of them have been benefiting from these funds, depriving their general shareholders. 

Moreover, the commissions led by M Khairul Hossain and Shibli Rubayat-Ul Islam did not take any effective measures against the companies that failed to utilise these funds on time.

Additionally, the firms were able to take advantage of various loopholes due to the lack of effective regulations in this regard.

It has been alleged that both the commissions benefited from the companies that were listed during their respective tenures. As a result, not only have investors been deprived of the expected returns, but the structure for IPO funds in the capital market has also been undermined.

Officials from the issuing companies have cited several reasons for the delays in utilising IPO funds as planned, including the Covid-19 pandemic, global economic crises, rising raw material costs, local issues with opening letters of credit (LCs), and the ongoing dollar crisis.

Under existing laws, companies are prohibited from transferring IPO funds to other accounts or using them for purposes not specified in their prospectuses. Any changes to the use or timing of these funds require prior approval from at least 51% of public shareholders, excluding sponsors and directors, at a general meeting. 

A proper notice of such a meeting must also be given to all shareholders. 

Stock market analyst Abu Ahmed told The Business Standard, "IPO proceeds rules should be tightened so that companies are compelled to use such funds properly. Besides, the regulator has to better understand the motive of issuers who want to raise funds from the capital market."  

Most of the 18 companies that haven't fully utilised their IPO funds have received extensions from the regulatory commission. But a few companies, which were listed on the capital market in the last two years, still have time to use their funds as per their prospectuses. 

Asiatic Laboratories, Best Holdings, Global Islami Bank, and Navana Pharmaceuticals are still within their allowed timeframe to use these IPO funds as per their prospectuses.

In 2011, state-owned company Bangladesh Shipping Corporation raised Tk313.70 crore from the capital market through repeat public offering (RPO) to expand its business operations, planning to purchase ships and construct buildings.

Though it was supposed to use the funds within June 2012, the company has yet to utilise Tk220.27 crore, or 70.22% of its RPO funds, as of June 2024. 

Aman Cotton Fibrous, which raised Tk80 crore from the capital market for business expansion in 2018, had been illegally benefiting from IPO funds by not using them for their original intended purposes.

The regulator found that the company used Tk73 crore from the IPO proceeds to create fixed deposit receipts (FDRs). These FDRs were then used as security for credit facilities that were utilised by other entities.

Among these entities, Akin Carriers Limited used an overdraft facility secured by a Tk38 crore FDR in Meghna Bank and another FDR of Tk15 crore in Al-Arafah Islami Bank.

Additionally, Aman Food Limited secured similar credit facilities using a Tk20 crore FDR in Commercial Bank of Ceylon PLC. The rest of the amount was spent on loan repayment and IPO expenses. 

The Khairul Hossain Commission did not take any action regarding this issue. 

However, in January 2022, the BSEC fined each director of Aman Cotton Fibrous Tk3 crore, excluding the independent directors, and imposed a Tk10 lakh fine on its auditor, ATA Khan and Co Chartered Accountants, for anomalies in the company's IPO fund utilisation plan and financial statements.

Regent Textile Mills, which raised Tk125 crore in 2015 for a BMRE project and a new RMG factory, also failed to utilise the funds as intended. Instead, the company diverted the money to its shipyard business and later acquired 99% shares of Legacy Fashion Limited, as a RMG project, with the unused funds.

Back in 2018, Kattali Textile raised Tk34 crore through an IPO for business expansion which turned out to be highly controversial. 

Some investors alleged that the company depends only on rental income from its factory in Chattogram, instead of using the facility for its business operations. 

In July 2020, the BSEC fined Kattali's managing director Tk1 crore and other directors, except for the independent and nominated directors, Tk50 lakh each, for misleading the securities regulator about IPO fund utilisation by filing false updates and submitting fake bank statements to back their false claims.