BSEC seeks explanations on the financial statements of Keya Cosmetics

The stock market regulator sought some documents and explanations from Keya Cosmetics as they suspected the company’s financial statements were misleading to investors.

The Bangladesh Securities and Exchange Commission (BSEC) recently sent a letter to the company’s chief executive to submit an explanation and documents within seven days.

The letter asked the company to submit VAT return documents and export certificates for the fiscal years 2017-18, 2018-19 and 2019-20.

BSEC also sought a clear explanation of the amount of the company’s trade receivables. In addition, an adequate inventory of 2018, 2019 and 2020 was searched.

The regulator wants to be informed about suspicious debts from 2018 to 2020. In addition, he asked for a clear explanation of the suspicious debt reserves.

In addition, the commission sought an explanation of the assets, liabilities and capital of Keya Spinning, Keya Cotton and Keya Knit Composite, three other companies under the holding company of Keya Cosmetics Limited.

Meanwhile, in April 2021, Pubali Bank published an announcement, inviting to bid for the planned auction of nearly 850 decimal places of the land of the Keya Group industrial complex along with the infrastructure of the plant and also the mortgaged luxury apartment complex of owned by sponsor-directors in the Gulshan area of ​​the capital.

The auction program included assets owned by Keya Keya Cosmetics Ltd’s flagship company, Keya Yarn Mills Ltd and its founder Abdul Khalek Pathan and his family.

With the uncharged interest added, Keya Group and its trustees-sponsors owe more than 800 crore of Tk to Pubali Bank, according to the bank’s announcement at the auction.

The company then paid the loan installment and Banca Pubali withdrew the auction notice, a senior Keya Cosmetics official said.

Keya Group is an example of how a company can grow rapidly in Bangladesh and decline at an even faster rate.

Abdul Khalek Pathan, a professional driver turned entrepreneur, founded his detergent and soap business in the 1990s, which grew to the highest level in the local market as well as earning export trophies in the early 2000s when the company was listed on the stock exchange.

It seriously expanded into the export-oriented textile and clothing industry and achieved success there as well.

But aggressive financial planning, mis-reporting of assets and liabilities, and the merger of troubled assets with the listed company led to the downfall of the once glorious entity.

Keya Cosmetics Ltd, which owns the group’s soap and detergent business along with most of the textile units, had absorbed an asset meltdown in fiscal year 2018-19 since the accounting regulator ordered the company to write off fake assets for over 1,000 crore of Tk.

Due to a larger one-time annual loss of its paid-up capital, Keya Cosmetics’ net asset value fell close to zero, posting a slight improvement with some earnings recorded for the fiscal year 2019-20. Subsequently, the company has no longer published financial statements.

Keya’s shares closed Monday at Tk7.70 each on the Dhaka Stock Exchange (DSE).

According to the DSE, sponsors and directors own 46.27% of the company’s stock, while institutional investors have 8.70% and general investors have 45.03% of shares in February of this year.

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