Finds CSE investigation
Bangladesh Building Systems, which has recently been listed with the Dhaka and Chittagong stock exchanges, has violated rules in using its initial public offering proceeds of Tk 14 crore, a Chittagong Stock Exchange investigation found. The CSE probe report submitted recently to the Bangladesh Securities and Exchange Commission said that Bangladesh Building Systems violated utilisation schedule of IPO proceeds and the condition 7 of IPO approval consent letter of the BSEC by using the IPO fund in segments not mentioned in the schedule.
According to the condition 7 of the BSEC IPO consent letter, proceeds of the public offering must not be used for any purpose other than those specified in the prospectus and any deviation in this respect must have prior approval of the shareholders in the shareholders meeting under intimation to the BSEC and the stock exchange.
But, Bangladesh Building Systems did not take any approval from the shareholders for the fund use deviation.
‘In reference to the CSE report, the BSEC has already issued a show-cause notice to the company asking it to explain the rules violation,’ said a BSEC official.
The BSEC on July 11 approved the company to raise from the market Tk 14 crore by issuing 1.40 crore shares at an issue price of Tk 10 each.
As per the BSEC approval, Bangladesh Building Systems was allowed to use the IPO proceeds to repay project loans worth Tk 7.66 crore.
But, the company repaid Tk 4.66 crore of the project loans and diverted Tk 2.99 crore to other segments, the BSEC show-cause notice mentioned.
The company in the IPO prospectus did not mention any allocation for any project named IFIL project finance, but the company diverted Tk 2.37 crore to a project by that name, the CSE report said.
The report also showed that company used Tk 5.14 crore to repay short term loans, which was Tk 0.86 crore higher than the amount the BSEC approved for the purpose.
The approved IPO prospectus of Bangladesh Building Systems showed that the company was allowed to spend Tk 4.28 crore for repaying short term loans.
The CSE report said that the company spent Tk 10.76 lakh to repay lease loans, which was Tk 11.52 lakh less than the BSEC approved for the purpose.
The company spent Tk 1.19 crore for the IPO processing.
The CSE report said the company did not submit to the bourse proper documents against the amount of fund spent.
‘The difference between the purpose of the IPO proceeds mentioned in the prospectus and actual utilisation has taken place as the IPO was approved based on the audited financial statements for the year ended on June 30, 2012 and we utilised the fund in August this year. In the meantime we repaid some of our previous loans,’ Bangladesh Building Systems company secretary Mohammad Golam Sabur told New Age.
‘If it requires, we will take approval from the shareholders in this regard,’ he said.
-With New Age input
