The auditor of Sonali Aansh Industries identified inflated assets, sales revenue and inventories in the FY24 financial statements of the company.
In a qualified opinion published on the Dhaka Stock Exchange's (DSE) website on Monday, it said a revaluation of assets had been carried out in FY07 and the company did not estimate any depreciation on the additional value resulting from the revaluation of fixed assets.
"As a consequence, the net assets value of the company remained overstated to the extent of chargeable depreciation and the net profit also remained overstated by the same figure over the years."
Moreover, no revaluation has been undertaken in the last 17 years.
Depreciation must be calculated on the fixed asset value as per the International Accounting Standards.
The jute goods exporter had reported a revaluation of fixed assets, including lands and buildings, worth Tk 504.31 million.
Had adequate provisions been made, EPS and NAV would have been adversely affected.
The company reported a profit of Tk 35.05 million for FY24, increased from Tk 20.92 million for the year before.
It also showed net asset value per share of Tk 61.80 in FY24, down from Tk 118.14 in the previous year.
According to the accounting policy, revenue is to be recognised when goods are delivered and risk of ownership is transferred to customers.
However, in practice, the company showed accumulated sales revenue without delivering goods to buyers. That the auditor said caused overstated sales revenue.
Sonali Aansh Industries reported sales revenue of Tk 790 million for FY24.
The company also reported inventories worth Tk 282.68 million as of June. "The amount has remained unverified due to a lack of inventory register and inventory report (Item wise)," reported the auditor.
About Tk 6 million has been kept by the company under the head "Workers Profit Participation Fund and Welfare Fund" as current liabilities in the financial statements for the year to June 30.
However, the amount has not been distributed yet. Moreover, the company has no separate trustee board, deeds or rules for the operation of the workers' fund.
Moreover, the fund had been used in the business operation as a source of financing without providing any interest against it.
The company showed account and other payables of Tk 74.61 million but this amount remains unverified for a lack of supporting documents.
Its first quarter profit tumbled 34 per cent year-on-year to Tk 16.37 million in FY25, while diluted earnings per share (EPS) stood at Tk 1.51 in July-September this year, down from Tk 2.29 in the same quarter last year.
The official concerned of Sonali Aansh Industries refused to make any comment on the auditor's opinion.
Stock performance
The stock had never been stuck on the floor during the time of price restriction. It traded at more than Tk 600 each share after the withdrawal of floor price in January this year.
The company's shares traded at above Tk 600 each until May 19 this year before tumbling to Tk 320 per share on May 20 following the price adjustment of 100 percent stock dividends for FY23.
When the company's stock traded at more than Tk 600 each share on the Dhaka bourse, two directors -- Jafar Ahmed Patwari and Mohammed Mahbubur Rahman Patwari -- sold 0.57 million and 0.50 million shares respectively.
The stock closed at Tk 234 per share on Monday, remaining unchanged over the day before.
The company paid a 100 percent stock dividend for FY22 and FY23 to increase its paid-up capital to meet a regulatory requirement.
Despite the stock dividend payouts, the market cap, Tk 108.48 million, is far below the minimum regulatory requirement of Tk 300 million.
Sonali Aansh was among the 64 companies that the Bangladesh Securities and Exchange Commission (BSEC) asked to boost paid-up capital to 300 million in 2021.
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