Despite being aware of Best Holdings Limited's financial instability, Sonali Bank invested in the company's placement shares, putting Tk 5 billion of the state-owned commercial bank's funds at risk.
The bank has bled Tk 4.23 billion from purchasing shares at a high price, with an additional Tk 2.8 billion loss due to the declining share price.
Furthermore, the decision to apply interest only on the Tk 10 face value instead of the total investment, including the premium, has resulted in a further loss of Tk 1.73 billion.
The Comptroller and Auditor General's or CAG office holds Bangladesh Bank accountable for approving Sonali Bank's investment in a financially weak company.
This observation was part of the audit report submitted to parliament, which reviewed Sonali Bank's loan information from 2019 to June 2021.
Best Holdings, the owner of the five-star hotel Le Méridien Dhaka, took in the investment to build and operate the hotel, as well as several other projects, including Marriott Bhaluka and The Muslin, a luxury collection resort in Bhaluka.
Sonali Bank's investment in the parent company's shares extends to other ventures, putting the bank's deposits at risk, according to the audit report.
Md Obayed Ullah Al Masud, the managing director of Sonali Bank at the time of the investment approval, could not be reached for comment.
Current Managing Director Md Afzal Karim declined to comment on the auditor general's report, calling it a government report, and evaded questions about new investment decisions.
In December 2019, Sonali Bank's board decided to purchase Best Holdings' placement shares at Tk 65 each, with a face value of Tk 10 and a premium of Tk 55.
Sonali Bank invested Tk 5 billion in 76.92 million shares.
Best Holdings sold shares at Tk 10 each to its subsidiary companies, Iconx Hotels Limited and Dhamshur Economic Zone Limited, where Best Holdings owns more than 51 percent of the shares.
The audit report indicates that Sonali Bank's loss due to paying a Tk 55 premium per share amounted to Tk 4.23 billion.
At that time, Best Holdings had a paid-up capital of only Tk 88.3 million and liabilities of over Tk 20.49 billion, though its authorised capital was Tk 10 billion.
When asked about the disparity in share prices, Sajjadul Kabir, the executive officer of Best Holdings's share division, said: "Placement shares were priced at Tk 65 each for all buyers. The share price for initial shareholders was Tk 10 earlier."
Best Holdings, which began its journey in 2006 as a subsidiary of the Metro Group, aimed to list directly on the stock market in 2020 despite allegations of inflating asset values.
The company operates in sectors such as construction, real estate, agriculture-based industries, hospitality, and advertising.
The ownership of Best Holdings is split, with 52.01 percent held by individuals and private limited companies, while 47.99 percent is owned by placement shareholders.
Among these shareholders, state-owned banks-Sonali, Janata, Agrani, and Rupali-hold 29.58 percent of the shares.
Best Holdings sought a direct listing on the stock exchange in 2020, citing its shareholding by state-owned entities.
Under the existing legal framework, the direct listing privilege is only afforded to government firms.
Best Holdings Ltd applied to the Dhaka Stock Exchange and the Securities and Exchange Commission for 'special permission' for direct listing to bypass this restriction, citing a recommendation from then Finance Minister AHM Mustafa Kamal.
It also called for the rules for fixing share prices to be relaxed.
RACE Asset Management, owned by Chowdhury Nafeez Sarafat, and state-run Investment Corporation of Bangladesh were the issue managers of Best Holdings, which was trying to raise more than Tk 2.38 billion through a direct listing.
The commission, wary of the letter's veracity, ordered the DSE to halt the process of direct listing sought by Best Holdings to raise capital in the market.
The market watchdog also decided to dig deep to avert overseeing a probable shady deal. It raised several other questions and sought explanations from the premier bourse.
In 2019, Best Holdings announced a swift stock market listing after receiving an investment from Sonali Bank.
At the time, RACE Portfolio & Issue Management Limited, led by its chairman Nafeez, was appointed as the issue manager to oversee the listing.
However, the company's listing was delayed due to controversies and financial irregularities surrounding the placement share sales.
After fulfilling regulatory conditions, Best Holdings began trading on the stock market on Feb 6, 2024.
The delay has resulted in significant financial losses for Sonali Bank, according to the CAG's audit report.
Later, Best Holdings raised Tk 35 billion through an initial public offering or IPO using the book-building method.
Shares were sold to general investors at Tk 24 each, while institutional investors acquired them at Tk 35 each.
On its first day of trading on the DSE, the share price increased by 10 percent to Tk 26.40. The latest price is Tk 26.30.
Sonali Bank, which purchased placement shares at Tk 65 each, is now facing a loss of Tk 38.70 per share. As a result, the bank's investment in nearly 77 million shares has led to a total loss of around Tk 3 billion.
—bdnews24.com
