DSE finds anomalies in eGeneration's IPO documents

eGeneration Ltd has submitted the Initial Public Offering (IPO) application but the Dhaka Stock Exchange says it is not satisfied with the documents and information provided by the company.

The firm submitted the IPO application after a lot of private placements. It distributed 53.26 percent of its existing shares this way. 

It claims to be one of Bangladesh's leading management consulting, technology services and outsourcing companies.

But in reply to the DSE query, it said neither did it have any outsourcing work order, nor did it make any revenue from it.

Apart from expressing dissatisfaction with the documents, the DSE board said the company is a high-risk one for investors and the capital market given its overall condition.

The company's prospectus says it raised its paid-up capital five times within just one year.

In 2017, the company's paid-up capital was Tk10 crore which was raised by Tk50 crore in 2018. The figure stands at Tk60 crore now.

In 2017, eGeneration's net profit was Tk8.68 crore and paid-up capital Tk10 crore. But in 2018 and 2019, the company's net profit was Tk10.49 crore and Tk10.90 crore respectively while its paid-up capital remained Tk60 crore.
 
The company's revenue, says the DSE, is insignificant compared to its investments.

In the last fiscal year, the information technology firm's total investment was Tk84.74 crore. But its turnover was only Tk36.39 crore during that period, which cast a big doubt over the company's revenue generation capacity.
 
The company's investment in property, plant and equipment items, intangible assets, and other areas seems significantly ineffective to generate revenue.

The company showed account receivables of Tk6.60 crore in 2019 and Tk6.09 crore in 2018.

eGeneration claimed that all its ''receivables are secure, and there is no bad debt and provision for doubtful debt.''

The stock exchange, however, does not think that the company will be able to recover hundred percent of its account receivables.

Also, the DSE observed that the company failed to comply with some clauses of the IPO rules.

The company's board of directors could not recommend a cash dividend to shareholders in the last five years. But it issued 277.37 percent bonus shares in 2017 for raising paid-up capital.

In the last fiscal year, the company's gross profit was Tk15.68 crore, which was Tk14.41 crore a year before.

At the same time, its earnings per share was Tk1.82 and net asset value per share Tk20.56.

However, the company now wants to raise Tk15 crore through IPO. It will use the IPO to expand its business, digital platform solutions, and market.

eGeneration started as a private limited company in November 2003 and began commercial operations in the same year.

In October 2019, the DSE formed a six-member IPO review committee to include a good-performing company in the stock market following the advice of the securities regulator.

The committee was to review the prospectus of any company applying for capital market listing through IPO and recommend it to the Bangladesh Securities and Exchange Commission (BSEC).

BSEC sources said the stock exchange submitted a recommendation paper on the prospectus of eGeneration.

''The DSE already gave recommendations about eGeneration. Our departments concerned reached out to the company about the issues,'' said Saifur Rahman, BSEC spokesperson and executive director.

eGeneration's Deputy Company Secretary Umair Karim told The Business Standard, ''Our IPO awaits the BSEC's approval. So we do not want to comment on this now.''

DSE Director Minhaz Mannan Emon also did not want to comment on the matter.