Probe launched into Associated Oxygen's alleged IPO malpractices

The market regulator has begun an investigation into Associated Oxygen over alleged irregularities in its initial public offering (IPO) application.

A group led by Kazi Saifur Rahman of NRB Equity Management and controversial ex-NBR official Matiur Rahman had reportedly committed serious fraud, involving the issuance of placement shares and forged signatures in the prospectus to bring the company to the secondary market.

Although BD Finance Capital Holdings was the issue manager, as per the company's IPO prospectus, NRB Equity Management allegedly carried out all related work. It was accused of forging the signature of Barun Prasad Paul, who was the acting managing director and CEO of BD Finance Capital at the time.

There was also an allegation that the company issued 50.8 million pre-IPO shares, which were equivalent to 63 per cent of its pre-IPO paid-up capital. Currently, the company's paid-up capital is Tk 1.09 billion.

Following these allegations, the Bangladesh Securities and Exchange Commission (BSEC) formed a three-member committee to conduct an inquiry. The committee has been asked to submit a report to the Commission within 60 working days from the date the order was issued.

"It is necessary to review and examine the suspected irregularities related to the IPO application and related issues of the company during the period from July 2017 to June 30, 2020," reads a BSEC order issued on January 21.

When asked, BSEC spokesperson Abul Kalam said the inquiry team had already begun its probe. "The Commission will take legal action based on the probe findings," he told The Financial Express over the phone.

In April last year, the Dhaka Stock Exchange (DSE) inspected the factory of Associated Oxygen and submitted a report to the commission in October that year, identifying anomalies in the company's business operations.

The company failed to hold annual general meetings on time and delayed IPO fund utilisation. As much as Tk 2.41 million has remained unutilised although the stipulated time has already expired.

"The Commission has already sent the DSE findings to the enforcement department for taking necessary action as per the securities rules, which is under process," Kalam added.

Associated Oxygen raised Tk 150 million in October 2020 for business expansion. The company has not published any financial statements after FY22 and has not paid any dividends.

The company also failed to hold annual general meetings (AGMs) since 2023, and the prime bourse downgraded the company to the 'Z' category in January last year.

As per the latest BSEC order, the three-member probe body will examine and verify nine specific issues according to the terms of reference (ToR).

The investigation team will assess the IPO application process of the company, the role and responsibilities of the issue manager, and whether proper due diligence and compliance obligations were fulfilled.

It will also evaluate the involvement of NRB Equity Management in preparing, verifying, and submitting documents for public listing, along with other relevant matters.

The investigation committee will verify the authenticity of value-added tax (VAT) and income tax assessments with a view to examining the accuracy and legitimacy of reported sales revenue.

The probe body will also examine its administrative expenses and finance costs to assess their rationale and compliance with applicable standards.

In addition, the adequacy, accuracy, and compliance of tax provisions will be assessed, while the company's current assets and fixed assets will be verified.

The committee will also examine the formation of the company's capital structure, including paid-up capital, allotment of pre-IPO shares, and capital raised against deposits of paid-up capital, the order reads.

At the same time, cash inflows from customers, trade receivables, inventories, procurement of raw materials, and other related operational and financial matters will be verified for the three-year period between July 2017 and June 2020.

"If anyone is found guilty, the commission will take stern action against those involved in malpractices," said the BSEC spokesperson.

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