Navana Pharmaceuticals PLC, a prominent name in the pharmaceutical sector, is under increased scrutiny following the release of its auditor's report for the quarter ending June 30.
The report raises concerns regarding the company’s use of funds raised through its Initial Public Offering (IPO), highlighting significant financial decisions and changes that have sparked questions about transparency and the protection of shareholder interests.
The auditor’s emphasis has raised red flags over some of the company’s recent financial decisions, sparking questions about the transparency of these moves and whether they align with the interests of shareholders.
As the report circulates, both industry experts and investors are watching closely, awaiting clarity on the unfolding situation.
One of the key concerns raised in the audit report revolves around the reallocation of IPO proceeds. Navana Pharmaceuticals had initially earmarked Tk 13.12 crore, or 17.49 per cent of the total Tk 75 crore raised through its IPO, for the modernisation and expansion of its SVPO facility.
However, during the company’s 7th Extraordinary General Meeting (EGM) on May 7, this allocation was redirected toward the construction of a new generic production unit—a notable deviation from the original plan.
This reallocation has raised eyebrows among stakeholders, as the construction of the new generic production unit was part of the company’s regular business operations and not originally intended to be financed with IPO funds.
The auditor’s emphasis on this issue points to a need for greater transparency and communication with shareholders regarding the strategic use of the raised capital.
At the same EGM, shareholders approved an extension of the deadline to utilise the IPO proceeds, shifting the target date from October 3 of this year, to October 3, 2025.
While this extension provides the company more time to deploy the capital effectively, it also suggests potential delays in the execution of planned projects. The auditor’s focus on this change underscores the importance of keeping investors informed about such shifts to maintain trust and market confidence.
Another significant issue highlighted in the audit report is the presence of unadjusted advances in the IPO proceeds utilization statement. Footnote No. 4 of the statement reveals that Tk 7.79 crore remains unadjusted, with Tk 2.24 crore carried over from a previous period.
The existence of these unadjusted advances raises concerns about possible inefficiencies or delays in project execution and financial management.
The auditor’s emphasis on this issue suggests that the company must address these unadjusted advances promptly, ensuring that all funds are used efficiently and in alignment with the stated purposes of the IPO.
But advance payments
Footnote No 5 of the IPO proceeds utilisation statement notes that no payments were made to related parties, as defined by IAS 24, during the quarter. While this is a positive aspect, the auditor pointed out that a vendor was paid the full amount in advance for civil material supply, civil and architectural design, drawing, and project management fees.
This practice of advance payment, although justified as a business need, may raise questions about the company's cash flow management and risk mitigation strategies.
Advance payments, particularly in substantial amounts, can expose the company to risks, including the potential for delayed deliveries, substandard materials, or services not being rendered as expected.
The auditor’s emphasis on this issue suggests that while the transactions were not with related parties, they still warrant scrutiny to ensure that they are in the best interest of the company and its shareholders.
