Amtex over Rs6 billion defaulter of BoP

Initial probe by FIA shows sister companies Shama Exports and Amfort also allegedly defaulters of over Rs1.4 bn each; AKD Securities was underwriter of Amtex Securities

KARACHI: The action taken by Federal Investigation Agency (FIA) against AKD Securities, Amtex and EOBI are strictly in accordance with the law as FIA has neither committed any act of selective prosecution nor has targeted any Brokerage House, asserted sources in the investigation agency. 

According to these sources, the case under FIR No 27/2015 by FIA Corporate Crime Circle, Karachi was registered against various accused persons who were part of management of M/s Amtex (Pvt) Ltd, EOBI and AKD Securities (Pvt) Ltd. The accused persons belonging to the management of AKD Securities (Pvt) Ltd were not nominated merely on the basis of research report issued by them. The real facts, according to the initial probe by FIA, behind the nomination of accused persons of AKD Securities (Pvt) Ltd are as under:

1. The AKD Securities (Pvt) Ltd was Initial Public Offer (IPO) issuer, Lead Manager, Arranger, Book Runner and Underwriter of M/s Amtex Securities (Pvt) Ltd. M/s AKD Securities Limited was mandated by the M/s Amtex Limited to act as a Lead Manager and Book Runner to the Issue/Shares, which was done through Book Building process as laid down in Appendix 4 of the Listing Regulations of the Karachi Stock Exchange 2009.

2. M/s AKD Securities Limited was also mandated to act as the Book Runner, Lead Manager to the Issue/Shares of M/s Amtex Limited. In the capacity of Book Runner, M/s AKD Securities Limited had underwritten the Book Building Portion of 42.70 million ordinary shares at the strike price of Rs13 per share. M/s AKD Securities Limited has underwritten 3.84 million Issue/Shares out of 18.30 million Issue/Shares of General Public Portions. Underwriter to Issue/Share takes responsibility if shares are not sold, he/she will purchase/pay for the shares he/she has underwritten. M/s AKD Securities (Pvt) Ltd earned underwriting commission of Rs4,559,750 from M/s Amtex Limited.

3. CEO/Directors of M/s AKD Securities (Pvt) Ltd allegedly hand in glove with CEO/Directors of M/s Amtex Limited got enlisted M/s Amtex Limited by concealing the fact that M/s Amtex Limited has allegedly defaulted of Rs6,373.121 million with Bank of Punjab (BoP) since June 30, 2008. The sister companies of M/s Amtex group viz Shama Exports (Pvt) Ltd and Amfort (Pvt) Ltd have also allegedly defaulted with BoP of Rs1,433.410 million on June 30, 2008 and Rs290.205 million on June 30, 2009 respectively. BoP vide letter dated 01.01.2016 confirmed that M/s Amtex Ltd and its sister companies namely M/s Shama Exports (Pvt) Ltd and M/s Amfort (Pvt) Ltd defaulted in loans. The material fact of defaulting by M/s Amtex Limited with Bank of Punjab of Rs6,373.121 million on June 30, 2008 was concealed dishonestly, deliberately and with criminal intentions by CEO/Directors of M/s Amtex Limited and M/s AKD Securities Limited in order to deceive, mislead and defraud EOBI and public at large.

Sources close to the AKD Securities and Amtex denied that Amtex and its other sisters organisations were defaulter of any bank as the news item appeared in this regard were totally baseless and had no truth.

They also rejected all the allegations of manipulation of shares price as pointed out during the early probe. They said these allegations are based on concocted facts and are far away from truth. Moreover these allegations emerged in the initial probe and are being checked by further investigations. 

However sources in FIA and Bank of Punjab insisted that Amtex and its sister organisations were defaulters of more than Rs7 billion. More investigations are being carried out to check the veracity of allegations against AKD Securities, Amtex and its sister organisations.

4. M/s AKD Securities Limited issued research reports in April, 2010 and June, 2010 and allegedly induced the investors including EOBI to purchase the M/s Amtex Limited shares. M/s Amtex Limited and its sister company M/s Amcap Securities (Pvt) Ltd in connivance with M/s AKD Securities Limited allegedly manipulated the price of M/s Amtex Limited shares and took it to Rs20 per share artificially by manipulating market forces, indicators and financial ratios with ulterior motives, personal gains and by way of causing loss to EOBI/public exchequer and public at large.

  5. AKD research report submitted by (AKD) Brokerage House was allegedly based on manipulated facts. Earnings Per Share (EPS) was wrongly quoted. In research report of AKD Securities on M/S Amtex, EPS of the company in 2010 was shown as 5.17 whereas the company, itself, showed EPS in its annual report of 2010 as Rs3.0 per share. Initial Public Offer (IPO) and enlistment in Karachi Stock Exchange (KSE) of M/s Amtex Limited was done through AKD Securities Limited. Besides, AKD Securities was lead manager, arranger, book runner and underwriter of the Amtex Limited and being lead manager, arranger, book runner, and underwriter, M/s AKD Securities was not supposed to issue such research report/advisory to any client/investor specifically suggesting to purchase such shares, as the same falls within the meaning of conflict of interest. As many as 515,634 shares were sold to EOBI through M/s AKD Securities on August 10, 2010 as per Central Depository Company (CDC) report dated 08.12.2011. AKD research report also showed the forecasts of EPS Rs7.10 and Rs9.93 for the year 2011 and 2012, but on grounds the Amtex suffered huge losses and its EPS went down in minus i.e. Rs7.19 in the year 2011 and Rs10.4 in 2012. The long term deposits were also decreased during the year 2009 and 2010 from Rs27,469,171 to Rs21,448,203 which showed that the M/s Amtex Limited was crunching its assets to manage the financial liquidity problems. The forecasts of AKD Securities were allegedly based on mala fide intentions and ulterior motives so as to cause wrongful monetary loss to EOBI/public exchequer and corresponding wrongful gain to themselves. Code of Conduct as mentioned in the Third Schedule of Brokers and Agents Registration Rules, 2001 was grossly violated.

  6. The research report issued in April and June 2010 of M/s AKD Securities (Pvt) Ltd can be established to be misleading and fraudulent, aimed at causing wrongful monetary loss to public exchequer and corresponding wrongful gain to the accused persons. 

7. The financial position of M/s Amtex Limited was not promising during the year 2009 and 2010 as the intangible assets were decreased during the year 2009-10 from Rs10,702,584 to Rs83,248,232 and the long term deposits were also decreased during the year 2009 and 2010 from Rs27,469,171 to Rs1,448,203 which shows that the M/s Amtex Limited was crunching its assets to manage the financial liquidity problems. Besides, it is also submitted that:

8. Contrary to the research report submitted by AKD Brokerage House showed the EPS of the company in 2010 was Rs5.17 and its actual EPS shown in the annual report 2009-10 of the company was Rs3.74. In the year 2010, again AKD research report showed the forecasts of EPS at Rs7.10 and Rs9.93 for the year 2011 and 2012, but on ground the M/s Amtex Limited suffered huge losses and its EPS went down in minus i.e. (-) Rs7.19 in the year 2011 and (-) Rs10.4 in 2012.

9. Accordingly the research report forecast the continuous increase in sales which had proved misleading as the sales went continuously down from 2009 to 2012. The research report wrongly says that “Amtex is amongst the largest vertically integrated textile set-ups in Pakistan and is a predominantly export oriented company with over 90 percent export sales,” whereas the Bank of Punjab vide letter dated 01.01.2016 informed that there was no repatriation against export bills of M/s Amtex Ltd, from which it was established that the research report of AKD Securities was misleading, based on mala fide intentions, for causing wrongful monetary gains to themselves and corresponding wrongful loss to the investors like EOBI and others. The AKD research report was compromised and the true facts regarding loans on company, etc were deliberately concealed in the research report whereas the company, itself, was showing the facts in its annual report.

10. It has been found from the annual reports of M/s Amtex Limited that the company’s other receivables have also come down from Rs174,538,211 to Rs151,604,395 from the year 2009 to 2010.

11. The sales of M/s Amtex Limited shares declined in the year 2010 to Rs11,066,128,618 from Rs14,119,587,545 in the year 2009. Owing to this decrease in the sales the administrative expenses increased from Rs126,535,980 in the year 2009 to Rs157,874,895 in 2010 which finally resulted in the sharp decline in the net profits of the company from Rs920,862,941 in 2009 to Rs730,512,401 in 2010, which is reflected in the EPS of the company which was recorded at Rs5.19 in 2009 and Rs3.74 in the year 2010.

12. During the year 2011-12 the long term liabilities of the company increased drastically from Rs50,000,000 in 2009 to Rs1,906,629,334 in 2010, on other side the deferred liabilities had increased from Rs49,393,749 in 2009 to Rs2,297,239,143 in the year 2010.

13. Further the sale of Amtex Limited shares during the year 2011-12 have been badly hit as it decreased from Rs6,426,927,017 in the year 2011 to Rs3,001,816,336 in 2012. As a result of decline in sales the administrative expenses increased from Rs.126,737,941 to Rs1,383,279,784 in the year 2011 and 2012.

14. Finally company sustained the negative EPS in year 2011 which was Rs7.19 and Rs10.40 in 2012. In the light of the facts/analysis, it is established that the research report of M/s AKD Securities Ltd was misleading and based on mala fide intentions allegedly for the purpose of gaining wrongful monetary benefits and corresponding wrongful loss to public exchequer.

15. The CEO/Directors of AKD Securities Limited namely Muhammad Farid Alam (CEO), Hina Junaid Balamgamwala (Director), Tariq Adam Ghumra (Director), Muhammad Iqbal (Director) also played a key role.

The above facts hinted that Karachi FIA had neither committed any act of “selective prosecution” nor targeted any Brokerage House i.e. M/s AKD Securities (Pvt) Ltd. The action of FIA was strictly in accordance with the law.