Keya up the creek
Potential bad debts of Tk 705cr loom over the cosmetics company
Keya Cosmetics is now in deep trouble, as potential bad debts of around Tk 705 crore in the form of trade receivables loom over the once popular household name.
Trade receivables are amounts owed to a business by customers following the sale of goods or services on credit.
The company kept a provision for the "remarkable amount" in its financial reports for the year ending on June 30, 2019 as bad and doubtful debts against recovery of trade receivable, said the company's auditor in an observation.
"It is now under consideration for a final declaration as bad debt after detailed investigation by the management," read the remark published by Dhaka Stock Exchange (DSE) on its website yesterday.
Incorporated in 1996, the company came to stand out as one of the popular cosmetics brands but its glory days are now fading.
Subsequently, repeated announcements were made for its shareholders informing that its sponsors, including Chairman Abdul Khaleque Pathan, want to offload their shares.
Though it declared 2 per cent stock dividend for the year ending on June 30, 2020, the auditor revealed that it has been suffering from a huge amount of trade receivables.
The dividend declaration caused its stocks to rise to Tk 8 from Tk 2. However, the stocks dropped 1.56 per cent to Tk 6.30 yesterday.
"We are trying to recover the amount so if it returns then it would show in income. But if it is not possible then a final declaration would come," said its chief financial officer, Humayun Kabir.
Responding to a question, Kabir said the amount was not due from any specific or few entities but rather from "scattered" debtors.
The auditor also observed that the company declared a huge amount of stock to be obsolete, amounting to Tk 711.75 crore, proceeds against the sale of which had brought in Tk 24.98 crore.
About Keya Cosmetics' bank loans, the auditor said the financial reports showed Tk 157.25 crore availed from Pubali Bank being carried over from previous years but with no mention of associated interest.
The same circumstances surrounded another Tk 12 crore taken from Sonali Bank and Tk 16 crore from Premier Bank.
The company fell in trouble for many reasons but the doubtful loans increased its woes, said a top official of a merchant bank.
The failure of the company is now resulting in sufferings for general investors and the stock market, so it should try heart and soul to recover the amount, said the official.