Nurani Dyeing entrepreneurs flee with entire IPO fund  

The Tk43 crore initial public offering (IPO) in 2017 by Nurani Dyeing and Sweater Ltd – a Feni-based sweater exporter – has been proved to be a fraudulent scheme.

The Dhaka Stock Exchange (DSE), in its inspection and investigation last year, found that over Tk41 crore of the IPO fund was embezzled by its entrepreneurs, who have already fled the country.

The company has been engaged in submitting false financial information and fake supporting documents since it had planned for the IPO.

It was filing fake turnover and fake fund utilisation reports, until the DSE inspection in the mid-2020 found the factory permanently closed.

Nurani Dyeing was a very controversial IPO in 2017 as the securities regulator under the then chairmanship of Professor M Khairul Hossain accorded its nod despite the company being a loan defaulter and withheld the Credit Information Bureau (CIB) report through a stay order from the High Court.

A company cannot go public if it or any of its directors is a loan defaulter. Since the Bangladesh Securities and Exchange Commission did not obtain any proof of loan default in the CIB report and that is why it did not stop the company from taking money from investors.

Now, DSE inspection has found that Nurani Dyeing used Tk11.8 crore of the IPO fund to pay back a small part of its defaulted loans which the company entrepreneurs previously embezzled.

Tk29.34 crore of the IPO fund was taken away through cash withdrawal or bank transfers to different related parties' accounts.

Less than Tk2 crore of the fund they could not embezzle as it was used to bear the IPO and some essential expenses.

The nightmare for investors was the company kept reporting false financial information before it went public and continued until the DSE inspection revealed the truth.

Its nearly Tk200 crore reported turnover in the two fiscal years 2018-19 and 2019-20 was fake, its submitted bank statements for supporting letter of credit for purchasing machinery worth over Tk24 crore out of the IPO fund were fake.

The company submitted fake bank statements to support its fake turnover, receivables, and even the fake taxes deducted at the source.

Auditor Shiraz Khan Basak and Company completely failed to identify the fraudulent activities of the company in 2020, finds DSE.

Another auditor Mahfel Huq and Company in 2019 submitted fabricated documents to support over Tk33 crore in transactions and fake financial balances.

Even in 2017, the company submitted fake documents to overstate its bank deposits and hide loan liabilities.

Nurani Dyeing also concealed its liability to AB Bank by over Tk110 crore and its financial disclosures regarding interest expenses were all false.

AB Bank classified the Nurani Account in June 2020 and in June 2021, the company owed over Tk233 crore to the bank, finds the DSE.

Not knowing about the company's so many fraudulent activities, stock investors were still trading each Nurani share on the DSE at Tk7.2 against the face value of Tk10.

Nurani's stock price began to drop from the Tk11-12 level in August last year when the DSE informed investors that it found the factory closed.