Mamun Agro anticipates transfer to main boards despite financial flaws

Mamun Agro Products looks to move to the main boards of the bourses from SME boards though its latest financial statement exposed the weaknesses in its business operation.

Its auditor has already given qualified opinions over its financial statement for FY24. It said significant data, such as the company's inventories, cash and receivables could not be verified.

This is the backdrop against which the board of directors of Mamun Agro at a meeting on April 23 decided to hold an EGM (extraordinary general meeting) to take shareholders' approval for the firm's listing on the main boards.

Mamun Agro has reported a 13 per cent year-on-year growth in profit to Tk 59.80 million for FY24.

According to the managing director of the Chittagong Stock Exchange (CSE), M Shaifur Rahman Mazumdar, a company's profits and growth are not worthy of consideration when there are qualified opinions over financial data.

"If this company [Mamun Agro] is allowed [to list on main boards], other SME companies may express their intention to get listed on the main boards, saying qualified opinion is not a barrier to the listing," said Managing Director of Midway Securities Md. Ashequr Rahman.

Mamun Agro is the first company to have considered exiting the SME boards to list on the exchanges' main boards.

Financial anomalies

In the qualified opinion posted on the website of the prime bourse, the auditor said it was not confident if property, plant and equipment were shown at fair value in the financial statement.

The company's revaluation surplus/adjustment was not made in line with the fair value method, it said.

Mamun Agro also has a huge amount -- Tk 9.41m to be paid to Workers' Profit Participation Fund (WPPF), increasing its liabilities.

The Labour Act 2006 provides for fund transfer to the WPPF no later than nine months from the end of the relevant year.

Mamun Agro also did not make any interest provision against the utilisation of the fund as per the act, which is another act of violation of the labour law.

The auditor said it could not confirm the quantities of inventories mentioned in the financial statement for FY24.

Moreover, the auditor could not crosscheck reported receivables and payables because it did not get answers to all queries made to the debtors and the creditors involved.

Mamun Agro Products was supposed to complete construction work within 18 months after raising money through a qualified investor offer in 2022. But it could not comply with the obligation.

On the decision to get listed on main boards despite financial inconsistencies, the company secretary of Mamun Agro Muhammad Imdadul Haque said, "Everyone becomes optimistic about their efforts and decision."

He was, however, unable to comment on the auditor's qualified opinion.

An official of the Dhaka Stock Exchange, who is associated with the listing process, said the transfer of Mamun Agro Products to the main boards would depend on decisions of the exchanges' boards and the securities regulator. He wished not to be named.

No guidelines for transfers from OTC, SME boards to main boards

Neither the Bangladesh Securities and Exchange Commission (BSEC) nor the stock exchanges have formulated guidelines for transfer of companies from SME, ATB (alternative trading board) or other boards to main boards of the exchanges.

In September 2021, the market watchdog issued a directive to abolish the OTC (over-the-counter) market through transfer of some companies to the alternative trading board (ATB) and main boards and delisting of others.

The directive was applicable only to the OTC companies at the time.

Two OTC companies -- Padma Printers and Rangamati Foods -- failed to be relisted on the main boards in the face of objections from the DSE following detection of financial anomalies.

The head of Midway Securities, Mr. Rahman said the DSE should have its internal regulations to streamline the transfer of companies from one board to another.

Shareholders' reaction to Mamun Agro's decision

Usually, a company is expected to see an appreciation of its stock price following a decision on its transfer to the main board.

Mamun Agro made a disclosure regarding the board's decision last Thursday. The same day the stock experienced a 2 per cent decline in market value to Tk 29.40 per share on the SME board of the Dhaka bourse.

That means shareholders refrained from exhibiting any enthusiasm over the proposed transfer to the main boards.

The stock of Mamun Agro closed at Tk 35.10 per share on February 16. Later, the price gradually fell and the stock experienced a loss of 19.38 per cent through Thursday on the Dhaka bourse.

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