Bangladesh Submarine Cable to issue shares for taking into account govt equity funds
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Bangladesh Submarine Cable Company Ltd (BSCCL) will issue shares to the government at a 66 per cent discount from the market price against share money deposits that the company received about six years ago.
The blue chip stock traded at Tk 218.90 on the Dhaka Stock Exchange on Sunday.
The government gave consent for the issuance of more than 22.13 million ordinary shares, said the company in a stock exchange filing on Sunday. The offer price is Tk 75 per share, with a premium of Tk 65 from the face value.
Earlier in February 2020, the Financial Reporting Council (FRC) issued a directive that companies must issue shares against share money deposits within six months after receiving the money.
The government gave the BSCCL Tk 1.66 billion as share money deposits between FY16 and FY17.
Through the issuance of new shares the pending issue will be resolved, said Managing Director of Prime Bank Securities Md. Moniruzzaman.
"In an ideal scenario, the issue price would have been set at 6-month average price," he added.
Share money deposit is the money paid in exchange for shares that have not been acquired yet.
The BSCCL had sought time and guidelines from the FRC on how the issue price of new shares should be fixed.
It calculated diluted earnings per share (EPS) for FY23, considering the equity money received in FY16 and FY17, and disclosed it in the financial statements.
Despite earnings dilution, the company saw EPS rise 11 per cent to Tk 15.19 for FY23.
The Submarine Cable had received the fund from the government under a development project titled 'Regional Submarine Telecommunications Project, Bangladesh'. The project was taken for establishment of Second Submarine Cable System (SMW-5) for international telecommunications.
Along with the BSCCL, some other state-run companies had received funds from the government.
Moniruzzaman, Prime Bank Securities, said the government should lend funds to state-run companies as low cost loans or in return for redeemable preferred shares to ensure governance in those companies.
"Repayment can be tracked and someone can be made accountable if the project fails to complete within the payback period."
The share issuance is subject to approval of the general shareholders and the securities regulator.
The managing director of Midway Securities, Md. Ashequr Rahman said newly issued shares would increase the government's stake in the company. But such shares will not be tradable and so price will not be adjusted after the inclusion of new shares.
"But the company's earnings will be diluted."
The BSCCL received another fund worth Tk 250 million in FY22 as equity money from the government for setting up 3rd Submarine Cable (work for which is in progress) aimed to strengthen the international telecommunications system of the country.
The company is yet to issue shares against the money.
The BSCCL bagged a profit of Tk 2.79 billion in FY23, a 13 per cent increase from the year before. It declared a record 51 per cent cash dividend for the year, buoyed by the year-on-year jump in profit.
For FY23, the company reported a 17 per cent rise in revenue to Tk 5.15 billion, driven mainly by IPLC (International Private Leased Circuits) rent, IP transit service and co-location services.