Why BSEC held up subscription of Asiatic Laboratories IPO

Infographic: TBS

The electronic subscription of the initial public offering (IPO) shares of Asiatic Laboratories by the general investors, which was set to begin today, has now been held up until further notice.

According to sources, the Bangladesh Securities and Exchange Commission (BSEC) received complaints through phone calls and other channels against the company – especially about its fixed assets being overstated, and disputes over ownership.

On Sunday, BSEC directed the Dhaka Stock Exchange (DSE) to halt Asiatic's IPO subscription until further instructions.

After putting the subscription process on hold, the commission has decided to dig deeper into the matter, for which, it formed a two-member investigation committee that will re-examine Asiatic's assets and ownership disputes.

BSEC Chairman Professor Shibli Rubayat Ul Islam told The Business Standard, "We held up the company's IPO subscription in order to protect the interest of investors."

"Also, a two-member committee has been formed to look into the matter."

Asset valuation

The valuation of Asiatic's assets was done by Chartered Accountant firm Shafiq Basak & Co.

According to the prospectus, the company's value of total fixed assets after revaluation stood at Tk490.74 crore as on 31 January 2021, which was Tk297.82 crore as on 30 June 2020 before revaluation.

Of the Tk490.74 crore, land and land development value was Tk308.56 crore, building and other construction Tk93.42 crore, plant and machinery Tk72.74 crore, and other assets around Tk16 crore as on 31 January 2021.

As on 30 June 2020, the figures were Tk126.96 crore for land and land development, Tk86.52 crore for building and other construction, and Tk68.31 crore for plant and machinery.

The net asset value per share stood at Tk56.61 with revaluation, which was Tk35.48 without revaluation.

Sheikh Zahidul Islam, FCA, partner of Shafiq Basak & Co, told TBS, "The valuation report has been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), and by following BSEC guidelines and other applicable laws, rules, and regulations."

He said, "If there is any question about the valuation of the property, plant and machinery, it should be specified, and we will respond accordingly."

BSEC Executive Director and Spokesperson Rezaul Karim told TBS, "The commission had approved Asiatic's IPO based on valuation report as it complied with the securities laws."

The IPO

In August last year, the BSEC allowed Asiatic Laboratories – a manufacturer of pharmaceutical products – to raise Tk95 crore through IPO under the book-building method.

The company said in its IPO prospectus that it will use the fund to begin the production of anti-cancer drugs.

Of the Tk95 crore, it will use Tk58.05 crore to buy and install machinery, Tk6.26 crore to build a factory, and Tk28 crore to repay bank loans.

Earlier, in a bidding through the electronic subscription system by the institutional investors, the cut-off price of the company's shares was determined at Tk50 each.

The general investors will get the shares at Tk20 each as per BSEC rules.

Company info

Asiatic Laboratories was incorporated as a private limited company in July 1970, and started commercial production in 1998.

It is engaged in the production and marketing of biological, non-biological, and sterile products such as tablets, capsules, syrups, creams, eye products, injections, and more.

At present, it produces 6 million tablets, 5 million capsules, 2 million injections, 1.5 million tube creams, and 1.6 million bottles of syrup every year.

In the fiscal 2020-21, the company's revenue increased to Tk145 crore from Tk119.6 crore five years ago.

In FY21, its net profit increased to Tk32.05 crore, which was Tk24.24 crore in the previous fiscal year.

Its earnings per share (EPS) stood at Tk3.65 in FY21, and the five-year weighted average EPS at Tk3.21.