BSEC orders three banks to cancel lien with Aman Cotton

The Bangladesh Securities and Exchange Commission (BSEC) recently directed Meghna Bank, Al-Arafah Islami Bank, and Commercial Bank of Ceylon PLC to cancel their lien with Aman Cotton Fibrous Ltd in a move to recover Tk73 crore of investors' funds.

Back in August 2018, Aman Cotton raised Tk80 crore from the stock market through an initial public offering (IPO) to buy new machinery and repay loans.

But instead of buying machinery, it pledged Tk73 crore of the IPO fund as security for credit facilities for two of its sister concerns - Akin Carries Limited, and Aman Food Limited.

Akin Carries enjoys a credit facility of Tk38 crore as an overdraft on the balance in fixed deposit receipt (FDR) in Meghna Bank, and of Tk15 crore in Al-Arafah Islami Bank.

Aman Food also enjoys a similar facility of Tk20 crore in the Commercial Bank of Ceylon PLC.

Earlier, Aman Cotton sought time from the commission till July 2023 to use its IPO proceeds in the original project.

The regulator fined the company directors, and its auditor ATA Khan & Co Chartered Accountants for anomalies in its IPO fund utilisation plan, and financial statements.

Due to the irregularities, in June 2020, the BSEC appointed a special auditor – Howladar Yunus & Co – to investigate the use of IPO proceeds and audited financial statements of the company.

The company gave loans to one of its sister concerns without the approval of its general investors. As a result, investors were deprived of gains and lost a lot of capital.

From the July-March period of 2022, Aman Cotton's net profit stood at Tk10 crore and earnings per share at Tk0.99.

As of 30 April 2022, sponsors and directors jointly held 65.06%, institutions 10.64%, foreign investors 0.09%, and the general public 24.21% shares in the company.

The last trading price of each share of the company was Tk25.2 on Thursday at the Dhaka Stock Exchange.