The securities regulator has instructed Silva Pharmaceuticals to conduct a revaluation of its machinery and equipment purchased with IPO funds and to disclose the operational status of the factory building constructed using the same proceeds.
The move aims to determine the company’s accurate financial position.
The drug maker was listed in FY18 through an initial public offering, raising Tk 300 million.
According to the prospectus, the company planned to spend Tk 122.5 million on purchasing brand-new machinery and equipment to be installed in a two-storey factory building. The building was to be constructed at a cost of Tk 56 million using IPO proceeds, while another Tk 99 million was earmarked for loan repayment.
However, the company’s latest IPO fund utilisation report shows that the allocation for new machinery and equipment has yet to be fully utilised.
Moreover, the company’s revenue has been declining since FY22, and it has been posting losses since FY24.
The post-IPO performance prompted the Bangladesh Securities and Exchange Commission (BSEC) to intervene. In the second week of last month, the regulator issued an order seeking reassessment of the company’s assets through an independent revaluation process.
BSEC spokesperson Abul Kalam and the company secretary of the drug maker, Md Iqbal Hossain, confirmed the regulatory move.
The BSEC had issued a similar order in April last year. The company subsequently submitted a valuation report, but in the latest order, the market watchdog said the report had not been prepared in line with the prescribed guidelines.
“We submitted a report earlier, but BSEC asked us to prepare another report following specific guidelines. We are preparing another report with the help of an auditor and will submit it soon,” said company secretary Iqbal Hossain.
According to BSEC sources, the regulator identified irregularities in the utilisation of IPO proceeds during an inspection, prompting further measures to protect investor interests by ensuring proper financial disclosure.
Meanwhile, the company’s stock traded at Tk 9.40 per share on the Dhaka Stock Exchange (DSE) on Tuesday.
Silva Pharmaceuticals has failed to fully utilise its IPO proceeds even six years after raising the funds. During this period, the company sought time extensions five times but failed to use the money.
Most recently, allegations have emerged that the company violated securities laws in the utilisation of IPO proceeds. In February last year, Pinaki & Company, Chartered Accountants, audited the IPO fund utilisation report and reported instances of non-compliance.
The commission warned that failure to comply with the directives, or confirmation of legal violations, would result in legal action against the company under securities laws.
Capital market analysts said transparency in IPO fund utilisation is critical to maintaining investor confidence, adding that such regulatory actions signal stricter oversight and accountability by the commission.
As of December last year, sponsors and directors jointly held a 45.21 per cent stake in the company, while institutional investors owned 16.07 per cent, foreign investors 0.01 per cent, and general investors 38.71 per cent.
Speaking on condition of anonymity, a senior BSEC official said the valuation report submitted earlier did not comply with the August 18, 2013 notification, which requires a fresh submission prepared by an independent valuer.
In March last year, the BSEC decided to examine Silva Pharmaceuticals’ asset base, business operations, and financial capacity over the past five years. A three-member investigation committee was formed with 15 specific terms of reference.
https://today.thefinancialexpress.com.bd/stock-corporate/post-ipo-underperformance-triggers-asset-inquiry-into-silva-pharma-1768323435
