Why market regulator appointed special auditor at Safko Spinning
The stock market regulator has appointed a special auditor to review the financial statements and overall business of Safko Spinning Mills in the interest of investors.
Islam Jahid & Co Chartered Accountants has been given 30 working days to examine the balance sheet and other parts of the financial statements, fixed assets, related party transactions, procurement of raw materials, costs of goods sold, imports, and relevant documents of the company.
Seeking anonymity, officials at the Bangladesh Securities and Exchange Commission (BSEC) said the regulator observed that the spinning mill is not appropriately growing and the investors are not getting expected returns from it.
Although the spinner could not recommend dividends in the fiscal 2018-19 and 2019-20, its share prices increased unusually. The company also raised paid-up capital by 87.39% since listing through the declaration of stock dividends, they said.
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According to the financial reports for 2019-20, the sales of the company were Tk33.18 crore, but the cost of goods sold was Tk34.56 crore, which the BSEC deemed unrealistic, the officials added.
The company provided loans to a related party, violating the BSEC order. The regulator deems it detrimental to the interests of the investors in the company and undesirable to the commission.
Company Secretary Iftekhar Ahmed stated that they had not yet received a letter in this regard.
In May last year, the BSEC formed a committee to investigate the securities law violations by controversial stock investor Abul Khayer Hero and his allies in trading Safko Spinning Mills shares.
In September 2021, the market regulator recast the board of directors of the spinning mill by nominating four independent directors.
The commission has recently turned down the proposal of Safko Spinning Mills to issue a 1% stock dividend for the fiscal 2021-22 because the company does not have enough retained earnings.
The spinner had negative retained earnings of Tk21.49 crore from the July to September quarter of the fiscal 2022-23.
It had recommended 2% cash and 1% stock dividends for FY22.
Safko Spinning Mills, which went into commercial production in 1997, got listed on stock exchanges in 2000.
In January 2009, its production stopped owing to big losses in the two prior consecutive years. The company then resumed production in May 2010.
In the July-September quarter of the current fiscal year, its revenue increased to Tk13.44 crore from Tk12.94 crore in the same period a year ago, and its net loss stood at Tk48 lakh compared to Tk60 lakh profit in the previous year.
Its loss per share stood at Tk0.16 and its net asset value per share was Tk21.28.
As of 31 December 2022, sponsors and directors jointly held 30%, institutions 3.49%, and general investors 66.41% of the company's shares.
The last trading price of each of its shares was Tk23.60 at the Dhaka Stock Exchange on Tuesday.
