Negative Cash flows doubt Padma Islami’s viability

block

Gazi Anowar :

The Negative Cash flows doubt Padma Islami’s viability as the audit company raised serious concerns regarding the company’s financial activities. It issued a “Qualified Opinion” due to various unresolved issues for the year ending December 31, 2023.

One of the critical concerns outlined in the report is related to the Sadaka Fund (Padma Welfare Fund), which amounts to Tk 4.34 crore.

The auditors noted their inability to confirm this amount due to a lack of sufficient appropriate evidence, raising questions about the fund’s management and transparency. As a result the Padma Islami Life Insurance Limited, a listed company of Dhaka Stock Exchange, is struggling with financial and compliance challenges,

Furthermore, the report indicated issues with cash management, specifically regarding a bank balance totaling Tk 5.51 crore. The auditors were unable to verify this figure due to missing bank statements for 134 accounts across various banks, complicating the company’s financial oversight.

block

In addition to cash management challenges, the company faces difficulties in confirming rental income and receivables. The auditor reported an inability to verify rental income of Tk 3.04 crore and rent receivable of Tk 8.52 lakh due to the absence of rental agreements between tenants and the property owner. This lack of documentation raises further doubts about the accuracy of the company’s reported income.

Most alarmingly, the report revealed a negative balance of Tk (254.41 crore) in the Life Insurance Fund and negative operating cash flows of Tk (13.45 crore) for the year. These negative figures significantly question the company’s ability to continue as a going concern, suggesting potential liquidity issues that could affect its operations.

Additionally, the auditors noted non-compliance with Section 72 of the Insurance Act 2010. Specifically, outstanding claims totaling Tk 225.66 crore were not settled within the mandated 90-day period, and the company failed to make any provision for interest on these claims, further complicating its financial situation.
Padma Islami Life Insurance has released its financial results for the second quarter ending June 30, 2024, revealing a continued decline in its financial health. The company’s Life Insurance Fund recorded a significant negative balance of Tk (271.72 crore), worsening from Tk (246.20 crore) a year earlier, underscoring growing concerns about its solvency.

The life revenue account highlights that total income for the second quarter of 2024 was Tk 8.07 crore, a decrease from Tk 9.22 crore during the same period in 2023. While the first half of the year showed a slight increase in total income, reaching Tk 13.79 crore compared to Tk 13.17 crore in the previous year, the overall trend remains troubling given the increasing negative balance in the insurance fund. Total expenses for the April-June 2024 period rose to Tk 13 crore, up from Tk 12.78 crore in the corresponding quarter of 2023. Similarly, total expenses for the first half of the year reached Tk 24.77 crore, compared to Tk 22.63 crore during the same timeframe last year.