JMI Hospital and Requisite Manufacturing Limited reported more than twice their earnings for the third quarter of fiscal 2021-22.
But the medical equipment supplier has failed to clarify the sudden growth to its investors, a breach of securities rules, sources at the stock market regulator said.
A senior Bangladesh Securities and Exchange Commission (BSEC) official said that according to the corporate governance code, a quarterly financial report should explain an abnormal increase or decrease in a company’s profits.
The companies will publish explanations in price-sensitive information statements and inform investors through stock exchanges and the media. And if this law is violated, the commission will be able to take legal action against the company concerned, he added.
The official said, “JMI Hospital recorded unusual profit growth in the January to March quarter of FY22. But he did not explain the reason for the increase. error general investors. So the matter will be investigated.”
A senior brokerage official said on condition of anonymity that the BSEC had enacted a law to ensure good governance by providing accurate information to the stock market.
“But most of the companies don’t follow this law. The main reason is that BSEC hasn’t taken disciplinary action against anyone for violating this law,” he added.
The official also said that no financial report from any investing company reveals the reason for the increase in profits. Again, many companies do not publish detailed financial statements. This gives stock manipulators a chance to spread rumors.
Trading in JMI Hospital shares on the Dhaka Stock Exchange (DSE) started on March 31. The price rose 270% by Tk20 each share within a month of the start of trading.
Then it decreases a bit. However, after the release of the company’s third quarter report on April 27, its share price rose 40% to a high of Tk 97. However, its shares are currently trading at 79.50 Tk.
Company chairman Abdur Razzak, who is currently traveling abroad, could not be reached for comment. Meanwhile, General Secretary Safiqur Rahman declined to comment on the matter.
According to JMI Hospital Financial Report, its revenue increased by 18% to Tk 47 crore in the January to March quarter and operating profit increased by 16% to Tk 12.20 crore. But, its profit after tax increased by 230% to Tk 14.46 crore.
The company’s profit grew at an unusual rate as Tk 6.95 crore was added to the balance sheet mainly due to deferred tax liability.
Deferred tax liability is an entry on a company’s balance sheet that records taxes that are due but not due until a later date.
This means that the company has accumulated more money in the form of deferred tax than the prescribed tax. Thus, additional money was added to the balance sheet during the said quarter.
The BSEC previously rejected the company’s initial public offering (IPO) application due to irregularities in the financial report. The company later rectified the errors and re-filed for IPO approval.
The company raised Tk 75 crore by issuing shares through the bookbuilding method. For this, he issued shares at Tk 25 each for institutional investors and Tk 20 for general investors.