National Feed Mills under BSEC scanner over financial discrepancies, compliance failure

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The Bangladesh Securities and Exchange Commission (BSEC) has stepped in to scrutinise National Feed Mills Limited, directing the Dhaka Stock Exchange (DSE) to submit observations on the company's financial irregularities and possible securities law violations. 

The regulatory move follows serious concerns raised by auditors over the feed manufacturer's financial statements, including questionable material purchases, unverified inventory, potential profit overstatement, and governance gaps.

In the first week of August, the BSEC wrote to the bourse seeking its observations, including any potential violations of securities laws, on the qualified opinions and emphasis of matter paragraphs in National Feed Mills' audited financial statements for the years ended 30 June 2024 and 2025.

The letter stated that, based on the annual financial statements for FY25, the auditors appeared to have found that the company had not maintained the proper books of accounts required by law.

"Further, it is also observed that the company did not provide any explanations regarding the qualified opinion in the board of directors' report as required under the Companies Act," the BSEC said.

The regulator asked the DSE to submit its observations, including details of any securities law violations and the persons responsible, within 30 working days.

National Feed Mills was listed on the stock exchanges in 2015 after raising Tk18 crore through an initial public offering. The IPO proceeds were mainly used to repay loans and support business expansion.

The company is engaged in the manufacture, production, processing, purchase, sale and conversion of feed for poultry, fish and ducks. It also produces various types of eggs and livestock, including high-breed poultry, and purchases and sells hens, cocks, ducks, cattle, goats and sheep.

According to its financial statements for the last five years, the company's sales and profitability have gradually declined since FY21. In that year, it reported revenue of Tk121 crore and a net profit of Tk1.68 crore.

Since then, both revenue and profitability have declined significantly, with revenue falling to Tk14.14 crore in FY25. Net profit stood at Tk23.54 lakh.

A year earlier, in FY24, the company had incurred a loss of Tk6.65 crore and did not pay any dividend. In FY25, it paid a dividend of only 0.10% to its shareholders.

Auditor flags financial discrepancies

In its qualified opinion, the auditor of National Feed Mill raised concerns over the company's purchases, receivables, loans, inventory, related-party advances and other accounting records.

The auditor said the company reported material purchases of Tk7.83 crore under cost of goods sold, while its VAT return showed purchases of Tk10.10 crore. The Tk2.26 crore difference suggests that purchases may have been understated, potentially resulting in an overstatement of net profit and earnings per share.

The auditor also said it could not find the ledger, vouchers and other supporting documents for the reported material purchases.

Concerns were also raised over accounts receivable of Tk8.76 crore as at 30 June 2025. The company had neither written off potentially uncollectible receivables nor made provisions against them as required under relevant IFRS provisions.

The auditor said it could not verify the subsequent position of the receivables because of a lack of supporting evidence. Balance confirmation letters sent to the concerned parties also received no response.

Similarly, accounts payable amounting to Tk84.21 lakh could not be verified because the auditor did not find the relevant ledger and supporting documents. Confirmation letters sent to the parties also received no response.

The auditor further found a discrepancy in interest expenses on a long-term loan. The company reported interest and charges of Tk4.41 crore, while its financial expenses showed interest on the term loan of only Tk2.45 crore.

This meant financial expenses appeared to have been understated by Tk1.96 crore, while profit was overstated by the same amount, with a potentially significant impact on earnings per share.

The auditor also said it could not find the interest expense ledger, the bank loan statement relating to a Tk25.78 crore Bank Asia term loan, or supporting documents for the repayment or adjustment of Tk1.96 crore during the year.

Another concern was the workers' profit participation fund (WPPF) of Tk2.48 crore, which had remained unpaid for several years. The auditor also said it could not find the WPPF audit report.

The auditor also raised significant concerns over inventory worth Tk55.31 crore as at 30 June 2025.

It said supporting documents, including a list of slow-moving items, a list of damaged items, a net realisable value test, an inventory valuation report and counting sheets, were not available.

Moreover, no physical inventory verification was conducted because management was unaware of the requirement, according to the auditor. As a result, the auditor said the inventory remained unverified.

Related-party advances were also flagged by the auditor. 

Of the Tk2.46 crore disclosed under advances, deposits and prepayments, Tk1.34 crore had been given to Karnaphuli Agro Industries Ltd and Tk11.63 lakh to National Hatchery Ltd without business consideration, according to the auditor.

The auditor also found Tk51.91 lakh as advances against purchases and Tk12.51 lakh as advances to other suppliers without sufficient supporting documents.