The stock market regulator has given permission to the Dhaka Electric Supply Company (DESCO) to issue another 2.38 million preference shares to the government against share money deposits.
The state-owned power distributor will issue shares worth Tk 23.81 million at a face value of Tk 10 each, according to a stock exchange filing on Monday.
The preference shares will be non-cumulative in nature, meaning the government will not be entitled to the missed dividends.
In July last year, the power supplier issued 607.69 million preference shares to the government against share money deposits to comply with a regulatory directive.
The company prefers to issue preference shares, considering that existing shareholders will not be affected, said an official of the company, requesting not to be named.
Although preference shares will not be added to equity shares, it will increase fixed payment liabilities for the company as the government will get priority over common stocks during the sharing of profits.
Thus, existing shareholders’ return on investment would be slashed by the dividend payout to the government against preference shares.
Usually, the dividend payment is made at a fixed rate against preference shares, but in this case, it will vary according to the company’s earnings.
As per the approval, the dividend will be determined by multiplying the ratio of preference share capital out of the total capital (ordinary share capital plus preference share capital) with 15 percent of the profit after tax.
That means the lion’s share of profits will be distributed to general shareholders in dividends.
Share money deposit is the money paid in exchange for shares that have not been acquired yet.
The government injected funds into DESCO on several occasions for the implementation of different projects to supply power efficiently since its inception in 1996.
DESCO had received more than Tk 6.42 billion in total from the government as share money deposits. However, it already issued shares worth more than Tk 6.07 billion in July last year.
Following the latest disclosure, the company’s stock dropped 2.65 per cent to Tk 22 per share on Monday on the Dhaka Stock Exchange.
Financial Performance
DESCO suffered a record loss of Tk 5.41 billion in FY23 for the first time due to a huge foreign exchange loss.
Despite the loss, the company paid a 10 per cent cash dividend from its retained earnings.
In FY24, the company again made a loss of Tk 5.05 billion for the same reason and declared no dividend for the year as retained earnings turned negative.
DESCO is still in the red with a loss of Tk 785 million in the nine months through March this year although revenue almost doubled year-on-year to Tk 6.78 billion during the period.
The company’s long-term interest-bearing debt burden grew nearly 10 per cent year-on-year to Tk 30.16 billion in the nine months through March this year.
https://thefinancialexpress.com.bd/trade/desco-to-issue-more-preference-shares-to-govt
