Placement shareholders at risk as Beka Garments faces auction

Individuals and entities, including Uttara Finance and Investments Limited, who bought placement shares of Beka Garments and Textiles, which is facing an auction for its business failure, are at risk.

In 2018, Uttara Finance bought a 9.41% stake in the garments company through placement after it had promised to get listed on the capital market by 2021.

The non-bank financial institution hoped to make a good profit by selling the shares of the garments manufacturer after its stock market listing.

Another 99 individuals and entities, like Uttara Finance, bought placement shares in Beka Garments. The company raised Tk60 crore by selling six crore shares.

But the export-oriented company could not enter the stock market. It is even no longer in production. The Adamjee Export Processing Zone Authority of Narayanganj has cancelled its 30-year lease agreement with the company and confiscated its assets due to non-compliance with rules and regulations and non-payment of rent.

In addition, the Bangladesh Export Processing Zones Authority has called an auction for the sale of the company's factory.

Sanjoy Roy was working as the chief financial officer at Beka Garments. He resigned a few months ago. He also bought placement shares in the company.

When contacted, he told The Business Standard that the company's core entrepreneurs and directors did not understand the garments business. The company has suffered as they did not have the know-how of operating this business.

"Investing in this company cost me a lot. There is no guarantee that we will get back the money," he added.

Uttara Finance officials have declined to make any comment on the matter.

This correspondent phoned Beka Garments Chairman Micky Diaz only to find his mobile switched off.

It is learned that the garment company had applied to the Bangladesh Securities and Exchange Commission (BSEC) to raise Tk35 crore through an initial public offering (IPO) from the stock market in early 2020.

But the commission rejected the company's application in July of that year, alleging that the prospectus provided false and exaggerated information about its revenue, assets and profits.

BD Finance Capital Holdings Limited and Shahjalal Equity Management Limited were the merchant banks for the company's IPO. Shiraz Khan Basak and Co audited the financials for 2019.

BSEC Executive Director and Spokesperson Rezaul Karim told TBS, "The company's IPO application was rejected for providing false information. After that, it did not apply anymore."

According to the IPO prospectus, the company mainly exports woven garments. Its factory had about 1,900 workers. In May this year, the workers staged a protest demanding their arrears.

Sanjoy Roy said, "I resigned immediately after this incident. So, I don't know whether the workers still have arrears."

According to the prospectus, the company had revenue of Tk216 crore and a profit of Tk28 crore in fiscal 2018-19.