Many cos fail to utilise IPO fund within timeframe

Dhaka,  Thu,  24 August 2017
Published : 13 Jun 2017, 00:48:38
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Many cos fail to utilise IPO fund within timeframe

Many cos fail to utilise IPO fund within timeframe
Mohammad Mufazzal


Many of the companies listed with the bourses have failed to utilise IPO (initial public offering) fund within the stipulated timeframe mentioned in their respective prospectus.

Failing to utilise IPO funds timely, the companies have revised the fund utilisation plans at their general meetings.

The former securities regulator chairman Faruq Ahmad Siddiqi said the objective of raising fund through IPO is hampered following change in utilisation plan due to different reasons, including increased expenses for business expansion.

"Due to any unavoidable reason a company can change its fund utilisation plan. But the objective of floating IPO will not be attained, if the regulator allows change in utilisation plan without valid reason," he added.

According to information gathered from the stock exchanges, some companies have revised their IPO fund utilisation plan. The companies include Regent Textile, Generation Next Fashions, The Peninsula Chittagong, Shasha Denims and Simtex Industries.

The Peninsula Chittagong received IPO proceeds on April 12, 2014, and the company was supposed to complete utilisation of the fund by June 30, 2016. But the company revised its fund utilisation plan at an EGM on December 04, 2016.

The fund utilisation report for the month of April 2017 mentioned that 99.44 per cent fund allocated for construction of Airport Garden Hotel remains unutilised.

Asked, an official of The Peninsula said they failed to utilise the fund specially allocated for constructing Airport Garden Hotel within timeframe due to complexities in land purchase.

"Finally, we have purchased the land for the hotel, and the company is working on it," the official added.

Regent Textile Mills was supposed to complete utilisation of IPO fund by June 19, 2017. But as per the auditor's report on utilisation of IPO fund, the company's major portion of fund remains unutilised.

The company was supposed to utilise above Tk 824.67 million, allocated for balancing, modernisation, rehabilitation and expansion (BMRE) of its plant by December 19, 2016.

But of the total fund for BMRE, 99.35 per cent has remained unutilised. Besides, some 95.17 per cent of the fund allocated for its new RMG project has been unutilised.

The company, however, revised the fund utilisation plan in November 2016 at an AGM.

Generation Next Fashions closed its public subscription on April 9, 2014, and the company was supposed to complete utilisation of the fund within one year from the date of closing subscription.

But as per the utilisation report of March 2017, the greater amount of its IPO fund remained unutilised. Of the total fund allocated for importing machinery, 70.01 per cent remained unutilised, while 62.39 per cent of fund allocated for machinery installation was also unutilised. In December 2016 the company revised the IPO fund utilisation plan at an EGM.     

The last date of completing the IPO fund utilisation by Shasha Denims was June 30, 2016. But 28.20 per cent of the fund allocated for its capital investment was unutilised as of April 2017.

Simtex Industries also failed to utilise IPO fund within the stipulated timeframe ending in December 2016. Some 88.37 per cent of the fund allocated for capital investment remained unchanged as per the report of April 2017. The company revised the fund utilisation plan in October 2016.

The officials of these companies could not be reached to make comments on the latest updates of fund utilisation.  

To discourage the companies' practice of brining deviation in IPO fund utilisation plan, the securities regulator has recently tagged the condition of taking prior approval of at least 51 per cent public shareholders, other than sponsors and directors, in a general meeting, if they want to do so.

"Previously, there was no mandatory requirement of taking consent of a specific number of shareholders to bring changes in fund utilisation plan," said a senior official of the securities regulator.

He said due to the latest regulatory requirement it will not be easy for the companies to bring deviation in proceed utilisation by taking approval of 51 per cent public shareholders.

    mufazzal.fe@gmail.com
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