Doubts over continuation viability of Int’l Leasing

The Daily Star  December 28, 2020
Star Business Report

Stock investors of the International Leasing and Financial Services (ILFS) yesterday received another bout of bad news in tune with irregularities unearthed by Bangladesh Bank in recent times.

In the latest revelation, its auditor expressed significant doubt over the company’s ability to continue business. The opinion was published on the Dhaka Stock Exchange (DSE) website.

The leasing company’s cash reserve with the central bank is 99 per cent lower than what it was required to maintain. In figures, it maintains Tk 20.73 lakh whereas it should have kept Tk 30.59 crore, said the auditor.

It also should have maintained a regulatory capital of Tk 233.36 crore. This too was Tk 2,520 crore in the negative, which means a shortfall of Tk 2,753.58 crore.

Its carry forward loss amounted to Tk 2,803 crore up to December 31, 2019 as against a paid-up capital of Tk 221 crore. Hence, the provisional carry forward loss is 10 times its total capital, said the auditor.

When the news came to light, stocks of the company plummeted. The price stood at Tk 5.60 yesterday whereas its face value is Tk 10.

The ILFS’s main source of cash inflows are from interest on lease, loan and advance, some 90.3 per cent of which are classified. So, the company is under a liquidity crisis when it comes to meeting depositors’ demand, said the auditor.

On the other hand, the company’s financial statement has been misstated with loans of Tk 204 crore, it said.

The company’s return on investment and return on assets were 65.8 and 62.5 per cent in the negative respectively, the auditor added.

The ILFS should have maintained a provision of Tk 2,219 crore for the year 2019 against classified loans but it kept Tk 2,080 crore, it added.