National Tubes faces scrutiny over accounting lapses and governance flaws
The findings have raised serious concerns about the reliability of the company’s financial reporting and internal control systems. The audit report was recently disclosed on the Dhaka Stock Exchange (DSE) website.
National Tubes Limited, a publicly listed industrial company, has come under scrutiny after its latest audited financial statements revealed significant accounting discrepancies, violations of international accounting standards, and corporate governance weaknesses.
The findings have raised serious concerns about the reliability of the company's financial reporting and internal control systems. The audit report was recently disclosed on the Dhaka Stock Exchange (DSE) website. On Monday, National Tubes' shares closed at Tk62.50 on the DSE.
One of the most serious concerns relates to work-in-process (WIP) inventories. The company reported GI Pipes, MS Pipes, and API Pipes WIP totalling Tk2.78 crore. However, the audit revealed that these inventories did not physically exist as of the reporting date. Negative variances between actual production and standard production were incorrectly recorded as WIP instead of production loss. As a result, inventory assets and retained earnings were materially overstated, undermining the reliability of the financial statements.
The audit also noted that National Tubes last revalued its property, plant, and equipment (PPE) in 2012. No revaluation has been conducted in the past 12 years, violating IAS 16, which mandates regular revaluation when the fair value of assets materially differs from their carrying amount. Additionally, the company has not reviewed the useful lives and residual values of depreciable assets annually, which may result in inaccurate depreciation charges.
Keep updated, follow The Business Standard's Google news channel
Auditors further observed that the company applies a uniform reducing balance method of depreciation across all asset categories, without considering actual usage patterns. No effective asset tagging system or complete fixed asset register exists, preventing physical verification of assets.
The audit report highlighted the absence of required impairment testing under IAS 36, despite clear external and internal indicators. Externally, the company's shares were quoted at Tk88.30 per share on 30 June 2025, compared to a net asset value of Tk137.32, indicating a significant gap between market capitalisation and net assets. Internally, production is only 4,000 tonnes per annum, far below the 10,000-tonnes capacity, signalling underutilisation of assets.
Additionally, the company has Tk84 lakh receivable from disinvested mills formerly under the BSEC, many of which are no longer operational. No Expected Credit Loss provision has been recognised, violating IFRS 9. The audit also noted that National Tubes reported advance income tax of Tk431 crore, while the corresponding tax provision stood at only Tk98 crore, leaving Tk333.4 crore of uncertain recoverability.
Serious irregularities were also identified in the Provident Fund (PF). Contributions and outstanding PF loans totalling Tk1.68 crore were not transferred to the designated trustee account, violating labour laws and fund regulations. Similarly, the gratuity scheme has not undergone the mandatory actuarial valuation, potentially misstating obligations.
Other governance issues included failure to conduct Workers' Profit Participation Fund audit, non-filing of withholding tax returns for the 2024-25 fiscal year, and unclaimed dividends exceeding three years Tk31 lakh not transferred to the Capital Market Stabilisation Fund, violating BSEC rules.
In the first quarter (July-September 2025), National Tubes' financial performance remained weak. The company reported net sales of Tk43 lakh, a net loss of Tk27 lakh, and EPS of Tk0.77 loss per share. The NAV per share stood at Tk136.84.
The company stated that EPS declined due to lower turnover compared with the previous period, while net operating cash flow per share decreased due to lower cash collections and higher payments for costs and expenses.
Despite these losses, the board has recommended a 1% cash dividend for FY25, signalling management's intent to maintain shareholder returns amid challenging conditions.
