July 19, 2024 5:16 am
Home Finance BSEC permits Power Grid to issue shares against govt funds

BSEC permits Power Grid to issue shares against govt funds

by fstcap

The securities regulator has approved the application of Power Grid Company to issue 201.08 million ordinary shares and 7.64 billion irredeemable and non-cumulative preference shares in favour of the power division secretary.

The state-run electricity transmission and distribution service provider will issue the ordinary shares at Tk 20 each, with a Tk 10 premium, and preference shares at Tk 10 each.

Hence, the total value of the new ordinary shares will be Tk 4.02 billion whereas the paid-up capital will increase by Tk 2.01 billion. The value of preference shares will be Tk 76.41 billion.

The power division secretary will get the shares against funds of Tk 80.43 billion given to the state-run company for implementation of different projects since its inception in 2000.

In a 2020 gazette, the Financial Reporting Council directed state-run companies to convert share money deposits into paid-up capital against the backdrop of such funds piling up with them.

It also made it mandatory that share money deposit is incorporated into paid-up capital within six months after the money is deposited in a company’s bank account in order to prevent fund anomalies.

The directive was given because the government had been and still is deprived of dividends in return for its equity investment.

Share money deposit is the money paid in exchange for shares that have not been acquired yet.

Implications of additional shares

There will be no business expansion or no new investment but the number of shares will be increased, which will affect the existing shareholders.

This might affect the company’s dividend payout ability for general shareholders.

Although preference shares will not enhance the equity size, the huge number of shares may increase fixed payment liabilities for the company in future.

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