Beximco Pharma has to explain why same auditor was hired for a decade

The stock market regulator served a show-cause notice to Beximco Pharmaceuticals and its auditor as the drug maker had its financial statements audited by the same firm for a decade in violation of securities rules.

The newly-formed securities commission sought an explanation from the company and the auditor on September 30 through separate letters issued to them. The respondents have been given 15 working days.

According to the letter, Beximco Pharma appointed M J Abedin and Co Chartered Accountant to audit its financial statement of FY12. The reports for the following years were also audited by the same auditor.

The Bangladesh Securities and Exchange Commission (BSEC) also said in the letter that any issuer company shall not appoint any firm of chartered accountants as its statutory auditors for a period exceeding three years in a row.

The company told the FE that it was preparing a response.

"Beximco Pharma violated the law and so we have asked for an explanation. They will be punished if they fail to justify their actions," said BSEC spokesperson Mohammad Rezaul Karim.

Beximco Pharmaceuticals is owned by Salman F Rahman and his family members.

Mr Rahman was a parliament member of the recently-ousted Awami League-led government and an advisor of private industry and investment to the then prime minister Sheikh Hasina.

Hiring the same company as auditor year after year compromises governance. Market experts believe Mr Rahman used his political power to avoid any punishment.

They say that if the same auditor continues to audit a company for a long period, a strong relationship is fostered between them. In such an instance, there is a high risk that anomalies will be overlooked due to the close ties.

Mr Salman, who worked for Sheikh Hasina as one of her trusted advisers until the downfall of the Awami League-led government on August 5, was overly influential in the financial sector, including in the capital market.

There are widespread allegations against Mr Rahman that he had abused power to raise huge amounts of money from the market, ignoring the securities rules and regulations.

Financial Performance

Despite macro-economic challenges, Beximco Pharma's profits jumped 51 per cent year-on-year to Tk 1.37 billion in January-March this year, owing to higher sales and efficient cost management.

The drug maker's sales rose 15 per cent year-on-year to Tk 10.98 billion in the Jan-March quarter.

Beximco Pharma also experienced a 23 per cent year-on-year growth in profit to Tk 4.37 billion in the nine months through March this year while sales rose 13 per cent to Tk 33.05 billion during the time compared to the corresponding period last year.

Its annual profit, however, dropped 7.7 per cent year-on-year to Tk 4.61 billion in FY24. Despite a decline in profit, the drug maker disbursed a 35 per cent cash dividend, same as the year before.

Meanwhile, the stock slid 1.11 per cent on the Dhaka bourse to Tk 71.10 per share on Monday.

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