BSEC forms body to review Kattali Textile business
Kattali Textile at a glance
- Business: Manufacturing and exporting different types of garments
- Production capacity: 4,37,250 pieces of garments per month
- Sponsor-directors hold 30.32% shares
- Last closing share price: Tk23.7 each
The Bangladesh Securities and Exchange Commission (BSEC) has formed a three-member committee to find out why Kattali Textile Ltd is failing to utilise its initial public offering (IPO) fund.
Mohammad Golam Kibria and Md Sohidul Islam, additional directors of the BSEC, and Masud Khan, assistant general manager of the Dhaka Stock Exchange (DSE), are members of the committee, according to a letter issued by the commission on Monday.
Keep updated, follow The Business Standard's Google news channel
BSEC Executive Director Mohammad Rezaul Karim said the commission formed the committee in the interest of investors and will take action if any anomalies are found in the inquiry.
A BSEC official said the company has failed to use its IPO fund properly in the stipulated time. Besides, the commission suspects that the company may be in partial operation now.
As a result, the company has failed to implement its expansion on time, depriving investors of their expected returns, he added.
The committee will investigate the overall business of the company, including financial statements, he said.
Company Secretary Fazlul Haque said they received a letter in this regard.
The factory is running now, and most of the IPO funds have already been used by the company, he added.
The inquiry committee will review the company's IPO proceeds in detail.
It will check the procurement of raw materials, the cost of goods sold, and import details, as well as the procurement of PPE.
It will also review the related party transactions of the company properly. The role of the audit committee and top management of the company will also be looked into.
Back in 2018, Kattali Textile raised Tk34 crore through an IPO to purchase capital machinery, repay bank loans, install an electric transformer, and bear IPO expenses. The company was supposed to use the fund by October 2020.
But as of January 2023, the firm has only been able to use 49.5%, or Tk16.84 crore, of the IPO fund.
Kattali Textile's IPO was highly controversial. Some investors alleged that the company depends only on rental income from its factory building 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.
Then, in July 2022, the commission expressed its concern about the company's utilisation of IPO funds after observing that it had not used the money in the past few months.
Kattali Textile produces and exports different types of garments. Its production capacity is 4,37,250 pieces of garments per month.
On Wednesday, the price of each share of the company closed at Tk23.70 on the Dhaka Stock Exchange.
As of 30 September 2023, sponsor-directors held 30.32%, institutional investors 23.10%, foreign shareholders 0.25%, and general shareholders 46.33% of the shares in the company.
