Titas to issue shares against govt equity

The state-owned Titas Gas is going to issue preference shares worth nearly Tk 2.83 billion against funds received from the government to comply with a three-year-old regulatory order.
Its board at a meeting on Tuesday decided to hold an extraordinary general meeting (EGM) on March 20 to receive the shareholders' approval.
Titas Gas, which enjoys a monopoly on pipeline gas distribution in Dhaka and Mymensingh, will issue irredeemable non-cumulative preference shares in favour of the government at the face value.
Preference shares, more commonly referred to as preferred stock, are shares, against which dividends are paid out to shareholders before common stock dividends.
Non-cumulative means the preferred stock would not come with entitlement to missed dividends.
The board prefers to issue preference shares than ordinary shares to ensure that existing shareholders are not affected, said a company official, asking not to be named.
Only ordinary shares boost the paid-up capital.
The government injected funds to the company as a share money deposit for implementation of several projects from time to time since the inception of the company in 1964.
The outstanding amount of share money deposits is Tk 3.01 billion until the end of 2023.
Although preference shares will not expand the size of the paid-up capital, existing shareholders of the company will be losers for dividends to be paid against preference shares.
Financial Performance in H1 FY24
The government hiked gas prices for power, industries, and commercial sectors up to 179 per cent, effective from February last year. That boosted Titas's half-yearly revenue by 82 per cent year-on-year to nearly Tk 178 billion.
However, Titas's half-yearly profit plunged 63 per cent year-on year to Tk 468 million in July-December 2023, as its gas distribution margin had been reduced to Tk 0.13 from Tk 0.25 per cubic metre of gas in July 2022.
The publicly-traded company, which was once perceived as a stable source of cash dividends, endured a first-time annual loss of Tk 1.65 billion in FY23.
At present, the government holds 75 per cent of the ordinary shares of Titas Gas, and the remaining shares are held by institutions and general investors.
The stock fell 2.52 per cent to Tk 27.10 per share on Wednesday from the day before and plunged 34 per cent in the past six trading days since the removal of floor price.
Last year, Power Grid Company of Bangladesh and Dhaka Electric Supply Company (DESCO) also decided to issue shares against share money deposits to comply with regulatory orders.
In a 2020 gazette, the Financial Reporting Council (FRC) directed state-run entities to convert share money deposits into capital against the backdrop of such funds piling up.
The directive was given because the government had been and still is deprived of dividends for its equity investment.

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