The securities regulator has cancelled the IPO (initial public offering) proposal of JMI Hospital Requisite Manufacturing Ltd after finding a number of non-compliances including overstating the profit.
Under the book building method, JMI Hospital is the first company whose IPO proposal has been cancelled by the regulator.
The Bangladesh Securities and Exchange Commission (BSEC) on Thursday issued a letter to the company cancelling its IPO proposal.
"The securities regulator was not able to consider the company's proposal of raising fund from the capital market as many non-compliances were found while scrutinising the IPO proposal," a BSEC official said.
On completion of road show in October, 2019 JMI Hospital, a sister concern of JMI Group, had submitted its IPO proposal to raise funds worth Tk 750 million from the capital market.
The company was awaiting the regulatory approval to conduct bidding required to determine the share prices for eligible investors and general investors.
Under such a situation, the securities regulator sent letter cancelling the company's IPO proposal.
Asked, the BSEC official said the company disbursed loan worth Tk 1.09 billion to another company of the same business group.
"The company which disbursed loan worth Tk 1.09 billion has submitted IPO proposal to raise Tk 750 million only. This company can meet the required fund by collecting the loan without going public," the BSEC official said.
Of the company's total sales, 44 per cent was conducted among the companies of same group, the official said.
He also said the state-run Investment Corporation of Bangladesh (ICB) invested Tk 810 million in JMI Hospital signing a MoU of getting 11 per cent return before going public.
"This type of MoU is not rational in case of ordinary shares."
Besides, the ICB Capital Management is also working as the company's issue manager.
"The role of the company's issue manager creates non-compliance due to the ICB's relation with the company," the BSEC official said.
He said the company also overstated profit showing lower depreciation expenses.
"The company's sales seemed inflated to us amid increased amount of receivables. Because of these reasons, the securities regulator was not able to consider the IPO proposal of JMI Hospital," the BSEC official added.
According to IPO proposal, JMI Hospital wanted to raise capital worth Tk 750 million from the capital market under the book building method.
The fund was supposed to be used for up-gradation and extension of its factory and repayment of loans.
The company's paid-up capital is Tk 900 million while the earning per share (EPS) was Tk 2.36 for the FY 2018.
JMI Syringes and Medical Devices, another sister concern of GMI Group, is already listed on the stock exchanges.