Regulator suspends Doer Services’ share subscription

The Bangladesh Securities and Exchange Commission (BSEC) on Tuesday suspended the Doer Services share subscription – originally scheduled for 19 to 23 January – following concerns raised by stakeholders about the company's business issues. 

To ensure transparency, the BSEC has also decided to investigate the company together with the Dhaka Stock Exchange (DSE) by forming a committee.

Founded in 2014, Doer Services began operations in February 2015, specialising in providing IT services. 

Despite objections raised by the Dhaka bourse, the Shibli Rubaiyat-ul-Islam-led commission approved Doer Services' Qualified Investor Offer (QIO) to raise Tk5 crore by offloading shares on the SME platform on 9 June. 

Following this, a written consent letter was issued on 5 December by the commission, which was headed by Khondoker Rashed Maqsood after the August political changeover.

Recently, media reports raised concerns about the company's service contracts, profitability, and income sources. In response, the BSEC has decided to investigate these matters before making a final decision. 

Alpha Capital acted as the issue manager for the company, while G Kibria served as the external auditor.

According to the company's prospectus, the funds were intended to be used as follows: Tk3.28 crore for product development and enhancement, Tk51 lakh for establishing a cloud computing environment, Tk28 lakh for product penetration, and Tk68 lakh for expanding its development facilities.

In response to the BSEC's decision, DSE Brokers Association President Saiful Islam thanked the commission for halting the company's subscription. 

He stated that this decision would promote transparency and accountability in the capital market, helping to restore investor confidence.

DSE raises concerns

In a letter to the Shibli-led commission, the DSE highlighted several financial challenges identified in Doer Services' prospectus, which led the bourse to refrain from recommending approval for the company's QIO. 

The DSE found that the company paid an eyebrow-raising 44,400% stock dividend in FY23, which helped raise its paid-up capital from Tk10 lakh to Tk44.40 crore. 

Additionally, the company earned Tk77 crore in revenue in FY24 and posted a net profit of Tk21.10 crore. The profit margin stood at 27.34%, which is abnormal compared to other companies, according to the letter.

It further noted that the company earns 82% of its revenue from its client Agrani Bank and 17% from the Insurance Development Authority (Idra).

A director of the DSE, speaking on the condition of anonymity, told The Business Standard that the company's reported profit of Tk21 crore from a business turnover of Tk71 crore is highly unusual. 

He expressed concerns that the company may have inflated its profits. Additionally, the director pointed out that the company's accounts receivable had surged from Tk5 crore to Tk36 crore, which he deemed abnormal. 

He also noted that the company's primary income relies on just two clients, but the prospectus does not specify the nature of the agreements with these clients.

Agrani Bank uses Celloscope, a software solution provided by Doer Services, to manage its agent banking operations, for which the bank incurs a monthly fee. 

However, the bank has failed to implement its own software, as mandated by regulatory requirements. As a result, the Bangladesh Bank has issued a letter instructing Agrani Bank to take the necessary actions to comply with the regulation.

Meanwhile, under an agreement with Idra, insurance companies provide policy information to customers via Doer through messages, for which Doer charges a fixed fee. 

There has been an objection from the insurance companies' association regarding this arrangement.

The DSE director warned that if either of these clients were to leave, the company would lose its business. Such a company, he concluded, should not be allowed to enter the stock market.