Coppertech's pre-IPO accounts come under fresh regulatory scrutiny

The securities regulator has set out to verify the authenticity of Coppertech Industries' pre-IPO financial statements to uncover any irregularities linked to the controversy surrounding the company's 2019 listing.

A decision to investigate Coppertech Industries was made in November last year, but the market watchdog finally deployed three members on Monday to start the probe, according to an order issued in this regard.

Investigators will review the company's pre-IPO financial statements for the three preceding years, the order said.

Coppertech Industries' IPO application was initially rejected by the Dhaka Stock Exchange (DSE) over irregularities in financial disclosures. Politically influential businessman Chowdhury Nafeez Sarafat reportedly lobbied for Coppertech Industries to get listed.

Meanwhile, the Institute of Chartered Accountants of Bangladesh (ICAB) revoked the licence of the company's auditor, Ahmad and Akhtar, for non-cooperation in a review of the IPO process.

The move to launch the inquiry is part of efforts by the Bangladesh Securities and Exchange Commission (BSEC) to shed light on undue decisions and activities of the previous commission.

According to the terms of reference, the probe committee will assess whether the pre-IPO financial statements presented a true and fair picture of assets, liabilities, equity, profits and cash flow, and whether they complied with global and national financial reporting standards.

Investigators will also check the physical existence of major assets, including plants, machinery, equipment, buildings and land, and examine the validity of earnings figures before and after tax. They will crosscheck the data with tax assessment documents submitted to the National Board of Revenue.

IPO approval ignoring opposition from DSE

In May 2019, the DSE rejected Coppertech's listing application, citing that the company's financial statements did not meet listing requirements, according to multiple DSE sources.

Senior officials of the prime bourse at the time reportedly identified significant anomalies in the auditor's report and questioned the validity of the claimed paid-up capital.

In July of that year, the DSE reversed its position and gave clearance for the listing of Coppertech Industries. The company raised Tk 200 million under the fixed-price method.

Market participants alleged that influential quarters in both public and private sectors played a role in securing regulatory approval.

Auditor's licence scrapped

The auditor failed to cooperate with the ICAB in its review of Coppertech's financial statements, which led to the cancellation of its licence in 2019, said then ICAB President AF Nesaruddin in a press release issued at the time. The audit firm was barred from auditing both listed and non-listed companies.

The review was initiated after the Financial Reporting Council requested the ICAB to examine allegations of anomalies in the company's accounts. According to the ICAB, the audit firm was contacted multiple times for documents but failed to provide the required information on various pretexts.

Link with Chowdhury Nafeez Sarafat

The rise of Chowdhury Nafeez Sarafat resulted in increased scrutiny in financial and regulatory circles, with his name surfacing in discussions around several market-linked ventures, including Coppertech.

His name appeared in connection with lobbying efforts around several listings, including Coppertech and Best Holdings Limited.

Allegations over Coppertech's financial reporting prompted the Financial Reporting Council to recommend actions against the auditor, while fund transactions by RACE Management-where Mr Sarafat is chairman and a major shareholder-were later suspended by the Bangladesh Financial Intelligence Unit.

The BSEC has formed a five-member probe body to examine a range of alleged irregularities related to bonds, IPOs, listings and share transfers committed during the Awami League regime, which was ousted in August 2024.

In this context, earlier controversies over the Coppertech IPO have come under regulatory scrutiny to unmask a broader pattern of market manipulation during that regime.

Meanwhile, the share price of Coppertech Industries fell 2.46 per cent to Tk 19.80 per share on Monday on the Dhaka bourse.

farhan.fardaus@gmail.com