Kattali Textile in a dire strait, seeks time for audit

Infographic: TBS

Kattali Textile Ltd is facing an extreme lack of purchase orders for the past few months due to an adverse business environment, the company told the securities regulator.

The Chattogram-based garment exporter, listed with both the bourses in the country, sought a 120-day extension of the special audit deadline, citing two different problems.

Its server was damaged earlier and the official responsible for cooperating with the auditors has been receiving treatment at a hospital for weeks, the company told the Bangladesh Securities and Exchange Commission (BSEC) on 3 April.

In March this year, the regulator appointed Islam Jahid and Company Chartered Accountants as the special auditor to review Kattali Textile's financial statements for the last three years and check how much of the funds it raised through initial public offering (IPO) five years ago was utilised as per its promises.

The company raised Tk34 crore through IPO to purchase capital machinery, repay bank loans, and install an electric transformer. Even after five years, around half of the fund remains unused.

Meanwhile, investors found its business to have started declining in the January-March quarter of 2022. More worrying for them was that they never had any financial update since then.

The regulator started also receiving investors' complaints that the company did not disburse the announced dividends among its shareholders.

The commission appointed the special auditor to find out the reasons behind Kattali Textile's repeated failure to use the IPO funds, disburse dividends for FY21, and publish financial statements for more than a year.

In a letter to BSEC, the company said, "We are currently facing an unforeseen situation that has impacted our ability to prepare for the audit."

"A short circuit had occurred at our head offices, which caused severe damage to our data servers, resulting in the loss of critical financial data. We have been working tirelessly to recover the data, but unfortunately, it will take us some time to retrieve all the necessary information required for the audit" reads the letter signed by Kattali Textile Managing Director Emdadul Hoque Chowdhury.

Fazlul Hoque, the company secretary of the firm, did not respond to phone calls and SMS for a comment.

In June 2018, the BSEC approved the company's IPO application despite lots of objections from the Dhaka Stock Exchange.

The BSEC fined Kattali Textile managing director Tk1 crore, and other directors, except the independent and nominated ones, Tk50 lakh each for filing false updates and submitting fake bank statements to back their false claims regarding its business and financials.

According to the company's stock exchange filings, in the July-March period of FY22, its earnings per share (EPS) rose to Tk1.05 from Tk0.90 during the same period a year ago.

In the January-March period, its EPS declined to Tk0.20, which was Tk0.29 in the corresponding period in FY21. The company recommended a 10% cash dividend for its shareholders in that fiscal year.

The last trading price of each share of the company on the DSE was Tk23.7 on Thursday.