Best Holdings episode gets murkier as ICB says it’s not part of the game

The direct listing fiasco of Best Holdings Limited has become murkier as new questions surfaced over how it used the name of a government company as its issue manager in a bid to raise about Tk 3 billion from the capital market.

The controversial plan by Best Holdings, the owner of Le Méridien Dhaka hotel, has been under intense scrutiny since Bangladesh Securities and Exchange Commission in a letter on Dec 15 blocked Dhaka Stock Exchange’s attempt to list it.

The office of Finance Minister AHM Mustafa Kamal also suspended a letter recommending changes to the requirements for infrastructure development companies’ direct listing plans after the media reported the content of the letter and SEC’s subsequent move.

Under the existing legal framework, the direct listing privilege is afforded only to state-owned companies.

But Best Holdings, which is also in the agriculture and construction business, applied to the DSE on Nov 12 for “special permission” for direct listing to take advantage of the finance minister’s recommendation.

Now, ICB Capital Management Limited, a unit of the government’s investment bank, Investment Corporation of Bangladesh, says it was in the dark about its name used as the issue manager for Best Holdings, until the media reported it.

RACE Portfolio and Issue Management owned by Chowdhury Nafeez Sarafat, is the other issue manager for Best Holdings, according to a summary prospectus made by the DSE for its directors.

Nafeez, also the chairman of Padma Bank, is a familiar name in the capital and money markets. He has invested in media outlets recently, becoming the president of the board of editors of an online news publisher. He is also the chairman of the board of trustees of Canadian University of Bangladesh.

Although its name appeared along with RACE on the Best Holdings prospectus, ICB Capital Management said it had not signed a deal with the hotel owner.

Shukla Das, CEO of ICB Capital Management, said on Saturday that they learnt about the matter from media reports and sent a rejoinder as well.

Generally, a company needs to apply first to get ICB as the issue manager. The CEO signs the deal finally after scrutiny. “But nothing like that has happened between us and Best Holdings,” said Das.

Several people related to the market described Best Holdings’ bid for direct listing as an “unprecedented big fraud”. They say an “influential quarter” tried to embezzle a huge amount of money through the direct listing.

“If Best Holdings falsified about the issue manager, it means the company forged the documents. It’s a criminal offence,” said a merchant banker, who requested to be anonymous.

Amin Ahmad, managing director of Best Holdings, did not respond to calls and SMS for comment.

Several people related to the market have held DSE partly responsible for the “falsification”.

“DSE should have checked [Best Holdings’ proposal] before tabling the summary prospectus at the board meeting. But failure to do so proves that the DSE either did not speak to the ICB Capital Management or tried to finish the process secretly,” said one of the market insiders.

A company must publish its prospectus to reveal its financial records to the investors when the listing process begins. “Where is the prospectus of Best Holdings? Why is it being hidden?” asked a former director of the DSE.

The former DSE director said a man, who “projects himself as an influential person”, is behind the company’s controversial bid for direct listing, backed by a DSE director.

Eunusur Rahman, chairman of the DSE, said they do not know the details about the matter as they did not discuss the proposal on Best Holdings’ direct listing following the BSEC’s letter.

“The IPO committee report and other papers made after checking Best Holdings’ records were not submitted at the board meeting,” he said.

The direct listing of Best Holdings was included as additional agenda for the 983rd meeting of the DSE board of directors which was scheduled for Dec 17.

But the securities regulator halted the process pointing out that a direct listing of the company will breach at least five sections of the rules under which the capital market operates.

That Best Holdings can raise funds without the expense of an IPO is based on an argument that some state-owned banks have invested in the firm.

BSEC asked the DSE whether the insignificant amounts of investments made by the state-owned banks in the equity shares of Best Holdings as a placement shareholder would be considered as owned by the government.

Best Holdings should also be ineligible for direct listing for having negative net current assets from August 2016 to 2019, the BSEC said in the letter.