Dhaka Stock Exchange has decided to oppose
the initial public offering of Orion Pharma that the Securities and Exchange
Commission approved last month.
The DSE board in a meeting on Thursday made
the decision after hearing the observations of an committee of experts.
The DSE panel pointed out a number of
questionable features in the IPO prospectus of Orion Pharma including
unjustified asset revaluation, slow growth in core business and misleading
information in the financial statement.
The DSE panel said that the Tk 60 offer
price of the Orion Pharma’s shares, including Tk 50 premium, was unreasonable,
and also questioned SEC’s hurried move to approve the revised IPO proposal.
The SEC approved the revised IPO proposal
of Orion Pharma on October 16 with offer price of Tk 60 within two days after
the company submitted the proposal.
According to the panel’s observation, the
company re-evaluated its fixed asset twice, in 2008 and 2011, where the value
of Tk 59.09 crore worth assets stood at Tk 117.22 crore.
The panel said such re-evaluation of
depreciable fixed assets was unjustified.
It also observed that the re-evaluation of
Orion Pharmaceutical’s subsidiary companies, IEL Consortium and Associates and
Dutch Bangla Power, was also unjustified.
The IEL Consortium re-evaluation surplus
was shown at Tk 28.56 crore on December 2011 whereas the company started its
commercial operation in May 2011.
The Dutch Bangla Power’s re-evaluation
surplus was shown at Tk 41.54 crore on December 2011 whereas the company
started commercial operation in July 2011.
Dhaka Stock Exchange to oppose Orion Pharma’s IPO approval
‘The panel strongly believes that the
re-evaluation of such a new company prior to commercial operation was unusual
and motivated, meant to inflate the net asset value to achieve higher offer
price,’ it said.
The panel also observed that among the Tk
702.63 crore consolidated revenue of the company in 2011, Orion Pharma
contributed only 25 per cent whereas the subsidiary companies contributed 75
per cent.
The project life of both the subsidiaries
is 15 years which will hamper the interest of the long-term investors, it said.
The financial statement of Orion Pharma in
2011 showed that the investment of the company in Orion Holding Ltd was Tk 9.96
crore whereas the financial statement of Orion Holding in the same period
showed the same investment to be Tk 9.60 crore.
The panel also found Orion Pharma violating
the Companies Act 1994 as the managing director of the company is also the
managing director of the two other subsidiaries of the company.
Section 109 of the Companies Act 1994 bars
any such practice unless the government’s permission was taken is this regard.
Orion Pharma is yet to receive any
permission from the government to let its managing director run other
subsidiary companies.
‘The SEC should reconsider the approval of
Orion Pharma for the greater interest of the investors,’ the panel concluded.
‘We will submit the
panel’s observations and board’s decision about Orion Pharma to the SEC this
week,’ a senior official of the Dhaka Stock Exchange told New Age.