Some companies inflate their financial performance to raise capital through public issues -- but they soon admit losses and leave investors high and dry.
Published : 24 Apr 2014, 03:24 PM
Padma Cements, listed in the capital market in 2002, claimed profits, but then started to show losses until it went into liquidation in 2012.
bdnews24.com investigated claims made by Khulna Printing & Packaging Limited (KPPL) after the company was found claiming a sharp jump in profits in its IPO prospectus.
But the very next year it sky-rocketed to Tk 1.19 billion, up by 247 percent.
Then, between July 2011 and June 2012, the company’s sales shot up to Tk 2.08 billion before dipping somewhat in July 2012- June 2013 to Tk 1.91 billion .
A general manager of a firm in a similar business to KPPL told bdnews24.com that to achieve a sales of Tk 2 billion in packaging material, the company would have to handle fish and shrimps worth Tk 20 billion.
Now KPPL says in its IPO prospectus that 67 percent of their revenue comes from their sister concerns.
KPPL's Director Amzad Hossain told bdnews24.com the total export of their whole group in 2012-13 fiscal was Tk 9.5 billion.
Amzad Hossain claims to have clarified thrice the huge rise in sales to the BSEC.
“We have installed new machines, so our sales have increased.”
Did KPPL’s sister concerns experience a similar rise in sales to support a jump in its sale of packaging material?
“The packaging cost can be 13 percent of the export price,” says Hossain.
Managing director of Elite Printing and Packages, Mohammed Arshad Ali told bdnews24.com: “Khulna Printing and Packaging and my firm operate in different industry, but I can assure you that we have the largest facility in the country which is 10 times the size of KPPL’s facility and we have never achieved Tk 2 billion in annual sales as yet.”
Arshad Ali is a member of Bangladesh’s Packaging Association.
SA Wadud, Managing Director of Bengal Marine Fisheries and a member of Bangladesh Fish Exporters & Importers Association. told bdnews24.com: “Whatever the price of the fish is there will be Tk 10 packaging cost per kg.”
The president of the Bangladesh Frozen Foods Exporters Association, Aminullah, agrees.
"We need Tk 20 to package a kg of shrimp that costs Tk 800. That is the maximum," said Aminullah, the managing director of Ark Sea Foods.
KPPL's flagship company Lockpur Fish Processing Co. Ltd is also a member of Bangladesh Frozen Foods Exporters Association.
On its claimed exports of Tk 9.5 billion, one would expect a packaging cost not exceeding Tk 1 billion.
Consumable stores include packaging cost and many other costs, so in reality, packaging cost is much less than 2.5 percent.
In 2012, Gemini exports touched Tk 1.216 billion where the cost of their consumable store stood at Tk 31 million -- 2.54 percent of total export turnover.
If Gemini is any indication, KPPL's claimed sales appear way above the top.