DESCO shows signs of recovery as losses shrink 75pc in FY25

The latest disclosure by Dhaka Electric Supply Company (DESCO) reveals that it is still in the red but also shows a trend of recovery, with losses reduced by 75 per cent year-on-year in FY25.
Higher distribution revenue and a stable foreign exchange market are two key reasons behind the significant improvement in the business of DESCO, which distributes electricity to the capital's western and north-eastern areas, according to the company's earnings note.
The company's distribution margin rose in February this year-from Tk 7.02 to Tk 12.82-for every Tk 100 worth of power distributed. That helped improve earnings per share - from a loss of Tk 12.72 in FY24 to a loss of Tk 3.15 in FY25, according to a stock exchange filing on Sunday.
Although the company is yet to disclose its annual distribution revenue, it has already reported an escalation in the nine months through March this year - up 136 per cent to Tk 5.41 billion.
This improvement can be attributed to a higher margin between the price at which DESCO purchases electricity and sells at the retail level, the company said.
The government in March last year raised the bulk electricity price by 5 per cent on average to Tk 7.04 per unit. The average retail price also increased from Tk 8.25 to Tk 8.95 per unit.
Miscellaneous operating income, including payments made by customers for materials and as meter rents, also boosted revenue earnings. DESCO used to provide some materials for free earlier but started charging customers for those in the second quarter of FY25.
DESCO began enduring losses in FY23 as the government increased the bulk electricity price without increasing retail prices. While on one hand the profit margin shrank, on the other the foreign debt burden turned heavier due to the depreciation of the taka against the dollar.
Subsequently, DESCO recorded a loss of Tk 5.41 billion in FY23, for the first time in 20 years. It cut annual losses slightly to Tk 5.05 billion in FY24.
The state-owned entity experienced a cumulative loss of Tk 11.71 billion in the three consecutive years to FY25. Earlier, the company had been able to maintain consistency in profits and paid handsome dividends to shareholders.
"Along with higher distribution revenue, efficient cost management after the political changeover and a stable forex market to some extent helped reduce losses," said Akramul Alam, head of research at Royal Capital.
The dollar-taka exchange rate has remained almost stable, oscillating between Tk 120 and Tk 122 since the ouster of the Hasina-led government. Policy measures taken by the Bangladesh Bank narrowed the exchange rate gap between the formal and kerb markets.
While the distribution margin improved, the company's overall financial performance is still influenced by other factors, such as foreign debts, Mr Alam said.
DESCO has a huge amount of foreign loans taken for various development works. The repayment must be made in dollars. Foreign exchange loss has been determined on the basis of the price of the dollar and euro on the last day of the quarter or year-end.
DESCO's long-term loans, including those from the Asian Development Bank and the Japan International Cooperation Agency, increased to Tk 27.97 billion by December last year from Tk 27.48 billion in June that year.
However, its short-term loans were slashed to Tk 860 million by December 2024 from Tk 2.37 billion in June 2024.
The company's board has not recommended any dividend for FY25, as in the year before, since retained earnings have already been wiped out.
As the company has failed to declare any dividend for two consecutive years, the prime bourse transferred its stock to the 'Z' category from the 'A' category, effective today (Monday).
The poor financial performance and the absence of dividend declarations drove the company's share price down by 3.67 per cent to Tk 21 per share on Sunday on the Dhaka Stock Exchange.
The company will hold its annual general meeting (AGM) on January 17 next year. The record date is set for November 20.
Share issuance against share money deposit
DESCO had received more than Tk 6.35 billion until FY24 from the government as share money deposits to implement various projects.
Last year, DESCO issued more than 607 million irredeemable and non-cumulative preference shares at the face value of Tk 10 each in favour of the Power Division secretary against funds received from the government.
The preference shares were non-cumulative in nature, meaning the government will not be entitled to the missed dividends.
The company is also in the process of issuing 2.38 million more preference shares at Tk 10 each in favour of the government against the share money deposit.

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