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Titas Gas Transmission and Distribution is going to issue 282.75 million non-cumulative preference shares against funds received from the government earlier as share money deposits.
The board of directors on Sunday gave its formal approval for the conversion of deposits worth Tk?2.827 billion into preference shares, according to a stock exchange filing.
It had announced its plan to issue shares against government funds in February, which was approved at the Extraordinary General Meeting held next month.
Preference shares or preference stocks provide dividends to shareholders before ordinary shares. Since the preference shares to be issued by the natural gas distributor will be non-cumulative in nature, the state-owned company will not be obligated to pay missed dividends.
Hence, the issuance of new shares will not dilute the earnings of common stockholders.
The move shores up Titas's debt-equity structure without diluting common equity, though it potentially places a heavier dividend burden ahead.
Common shareholders should watch out for future dividend policies and financial health.
Both the face value and the issue price of the preference shares will be Tk 10 each.
According to its financial statement for FY23, Titas had received share money deposits worth Tk 2.83 billion, which rose to Tk 3.52 billion by FY24.
As Titas is currently a losing concern, it is likely to receive more money from the government, which will again be converted into preference shares in the future.
The natural gas distributor incurred a loss of Tk 9.48 billion in the July-March period of FY25.
According to the company's un-audited statement, its loss per share stood at Tk 9.58 for the nine months through March this year, 474 per cent up from the same period a year ago.
The company reported a system loss of 10.13 per cent for the period of July-March FY25, whereas the allowable limit is 2 per cent.
System loss in Titas Gas is the unaccounted-for gas -- mainly due to theft, leaks, and faulty metering. This results in losses of billions of taka, deeply impacting the company's financial health. System loss is also a reflection of the company's poor operating efficiency.
Meanwhile, the stock of Titas Gas rose to Tk 19.40 per share on Sunday on the Dhaka Stock Exchange, 1.04 per cent up from the previous day.
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