Lub-rref spends sixth time higher than funds allocation in land developments: Auditor

Infographics: TBS

Lub-rref (Bangladesh), a lubricant blender and refiner, has allegedly violated regulatory requirements by spending more than six times its allocated budget for land acquisition and development under its expansion project, without seeking shareholders' approval.

According to an auditor's report on the use of initial public offering (IPO) funds, the company had earmarked Tk7.88 crore for land and land development but ultimately spent Tk49.61 crore, which is an excess of around Tk41 crore.

Any change in the utilisation of IPO proceeds requires shareholders' approval through an extraordinary general meeting (EGM), followed by approval from the Bangladesh Securities and Exchange Commission (BSEC).

Despite utilising excess funds, Lub-rref (Bangladesh) did not arrange an EGM or obtain regulatory approval in this regard. 

According to MAB & J Partners, the company's chartered accountant and auditor, the excess expenditure on land and land development constitutes a significant non-compliance with the approved IPO fund-utilisation plan.

As per the report of the auditor, Lub-rref spent Tk49.61 crore in two phases. In the first phase by 30 April 2024, it spent Tk35.91 crore for land and land development purposes. The payments were made through the banking channel. 

In the second phase, between 1 May 2024 and 30 June 2025, it spent Tk13.70 crore, but the auditor got supportive documents of Tk5.79 crore, leaving Tk7.90 crore unsupported. 

Kabir Hossain, company secretary of Lub-rref (Bangladesh), told TBS, "When the expansion project was undertaken, the land area was only 25 acres. To execute the investment plan, the company later acquired a total of 40 acres of land."

He explained that the new project site in Julda, located along the banks of the River Karnaphuli, consists of very low-lying land. "To make the land usable, we needed to fill it with 20-24 feet of sand," he said. "So, additional funds were spent beyond the initial plan."

When asked why an EGM was not arranged to approve the change in IPO proceeds, he said, "We did not hold an EGM, but we informed the commission, and its teams have visited the site."

Lub-rref (Bangladesh) has taken base oil refinery project cost was Tk1,283 crore, including Tk150 crore IPO fund.

The project was included a jetty, a tank terminal, a modern base oil refinery, a hydrogen plant and a specialised bitumen plant.

Of this project, Tk900 crore was loans and Tk750 crore foreign loans, which were supposed to be used as LC for the project. But due to the global crisis and local liquidity shortage, the disbursement of those loans experienced delays.

In 2021, the company successfully raised Tk150 crore from the capital market to purchase machinery and repay existing loans.

The auditor's report shows that by August 2025, Lub-rref had utilised Tk136.89 crore of its IPO fund – Tk46 crore repayment of bank loans.

Between May and June alone, it spent Tk37.47 crore, including Tk13.70 crore on land development and Tk23.40 crore for working capital.

Unspent amount up to August, Tk13.10 in principal, but with the interest amount, the total unspent amount is Tk19.86 crore.

Incurs Tk66cr loss

Lub-rref, once a highly profitable lubricant blender and refiner known for its BNO brand, has suffered a dramatic financial reversal, reporting a record loss of Tk66 crore for the 2024-25 fiscal year. 

This collapse, attributed to severe banking restrictions and a crippling shortage of working capital, has forced the company to declare no dividend for the first time since its listing.

Its previous data showed that after listing on the bourses, it had posted a regular profit until FY23, with the highest Tk36.43 crore in FY21.

After that, due to the complexities in opening LCs amid banking restrictions began in October 2022 with its lead banker, Social Islami Bank's Agrabad Branch, the company failed to import raw materials and was forced to continue operations by procuring them from a local vendor that imports the materials from abroad.

In FY24, it incurred a loss of Tk10.76 crore, a reversal from a profit of Tk20.47 crore the previous year, driven by higher financial expenses and decreased overall income and paid 1% cash dividend for its shareholders.

Uncertainty over Tk20cr IPO funds

Lub-rref has kept its Tk13.10 crore funds collected from the IPO in Social Islami Bank in a special notice deposit account for the purpose of using the funds for expansion.

According to an auditor's report published on the DSE website on 9 November, the unspent funds – held in bank accounts – had grown to Tk19.86 crore with accrued interest as of August 2025.

Earlier, Kabir said, "We kept the funds in the bank, but the bank did not repay us, citing liquidity crunch. The company also owed the bank, as it is the lead banker of the company."

Founded in 2001, Lub-rref began commercial operations in 2006. Today, 60% of its lubricants are produced from responsibly recycled sources, with the remaining 40% derived from imported base oil.