Daffodil Computers has decided to increase the Daffodil Group'sstake in it by converting a loan into equity instead of repaying it in cash.
The founder of Daffodil Group, Md. Sabur Khantold The Financial Express that Daffodil Computers currently does not have sufficient funds to repay the loan.
"The interest rate on this loan will double next year. The company is already bearing a huge financial burden.So, we have made this decision to reduce financial expenses and enable investors to receive higher dividends in the future," he said.
In a filing with the Dhaka Stock Exchange (DSE), the company disclosed its plan to issue shares against the loan.
The board of directors of Daffodil Computers in a meeting on November 10 approved the issuance of 32.69 million new shares for Tk 15 each against the loan of Tk 0.49 billion taken from Daffodil Group.
However, the decision is subject to approval from theBangladesh Securities and Exchange Commission (BSEC).
The company has also sought shareholders' consent and scheduled an extraordinary general meeting (EGM) for December 29 to finalize the decision.
Founded in 1990, Daffodil Computers is a public-listed ICT conglomerate in Bangladesh. It is known for being the first purely IT-based company to be listed on both theDhaka and Chittagong exchanges in 2006.
Currently, the company is listed under the 'B' category on the DSE, as it has paid less than 10 percent annual dividends. Its profit and dividends have been declining gradually in recent years.
According to the FY24 financial statements, the company had finance costs of Tk 55.71 million while it earned a profit of Tk 10.58 million, indicating that high finance costs were significantly impacting profitability.
In the first nine months of FY25, finance cost was Tk 33.89 million, while profit was Tk 15.65 million.
Mr. Khan told the FE that the loan had been provided at a very low interest rate -- 5 per cent -- but from next year, the rate is set to double, which would further reduce the company's ability to pay dividends.
Meanwhile, Daffodil Computers' share price rose by 2.69 percent to Tk 34.40 on Tuesday on the DSE.
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