Asiatic Lab faces penalties for fake land documents 

TBS Illustration

The stock market regulator has uncovered false documents related to land ownership, inaccurate financial statements, and fraudulent reports of share money deposits submitted by Asiatic Laboratories, whose initial public offering (IPO) is currently in progress.

At the same time, the Bangladesh Securities and Exchange Commission (BSEC) has given the green light to proceed with the IPO process, which had been on hold due to allegations. Consequently, there should be no issues with the public subscription phase.

Due to violations of securities laws and proven allegations, the commission has imposed a fine of Tk50 lakh on each of its directors and the issue manager.

Additionally, Managing Director Monir Ahmed, chief financial officer, and company secretary of Asiatic Laboratories, in their roles as signatories in the prospectus, are each facing fines of Tk25 lakh.

This means that the managing director faces a total fine of Tk75 lakh for his involvement in both segments of the process.

According to sources at the BSEC, it took these actions in its latest meeting. In September last year, the commission granted permission to Asiatic Laboratories to raise Tk95 crore through an IPO using the book-building method. This involved electronic subscriptions by eligible investors to determine the cut-off price of shares.

The cut-off price for Asiatic Laboratories' shares was initially set at Tk50 each, but as per BSEC conditions, general shareholders are entitled to purchase them at Tk20 each.

However, a day before the commencement of public subscriptions, the BSEC halted the process due to allegations received by phone and anonymous sources. This suspension remained in place until a decision was reached on January 15 of the same year.

During this period, the IPO process at Asiatic Laboratories remained on hold. Subsequently, the BSEC established an inquiry committee to investigate the allegations, and the committee has since submitted a report to the commission.

Before the BSEC's investigation, the Financial Reporting Council (FRC) had raised concerns about Asiatic Laboratories' IPO.

The FRC discovered that Asiatic Laboratories had inflated the value of its properties, a move believed to be an attempt by the drugmaker to secure higher share prices. The council presented its findings to the BSEC in May concerning the prospectus and audited financial statements of the pharmaceutical company.

According to the company's prospectus, its asset value increased by over 119% over five fiscal years, spanning from fiscal 2016-17 to fiscal 2020-21. Furthermore, the asset value surged by more than 73% year-on-year in FY21.

Asiatic Laboratories' Company Secretary Istiaq Ahmed could not be reached over phone for a comment. 

The fines

As a result of submitting counterfeit land documents to the commission, the BSEC has imposed a fine of Tk50 lakh on each of Asiatic Laboratories' directors, excluding the independent directors.

According to its prospectus, the company has five directors, all of whom are facing fines of Tk50 lakh each. Additionally, the managing director has been fined a total of Tk75 lakh – Tk50 lakh in his capacity as a director and Tk25 lakh as a signatory to the prospectus.

The issue manager, Shahjalal Equity Management, has also been fined Tk50 lakh for its false due diligence in the company.

According to sources, the commission has decided that the company will conduct a thorough revaluation of its land and make necessary corrections in the prospectus, which will then be resubmitted to the commission. Previous details, including the bidding process, will remain unchanged, with the exception of the land valuation.

Furthermore, the BSEC has resolved to issue a warning letter to auditor Mohammad Ata Karim & Co, chartered accountants, for preparing financial statements based on false land documents. Additionally, a warning letter will be issued to Ashraf Uddin & Co, chartered accountants, for allegations of false statements and auditor reports regarding share money deposits and utilisation.

Asiatic Laboratories, a pharmaceutical product manufacturer, received approval from the BSEC to raise Tk95 crore through an IPO under the book-building method on 31 August of the previous year. The company plans to utilise the funds to commence the production of anti-cancer drugs, allocating Tk58.05 crore for machinery acquisition, Tk6.26 crore for factory construction, and Tk28 crore for bank loan repayment.

Asiatic Laboratories, established as a private limited company in July 1970, initiated commercial production in 1998. It is primarily involved in the production and marketing of a wide range of pharmaceutical products, including tablets, capsules, syrups, creams, eye products, injections, and more.