The securities regulator has allowed Bangladesh Submarine Cable Company Ltd (BSCCL) to issue 22.13 million ordinary shares to the government against share money deposits to comply with a more-than-four-year-old regulatory order.
The Bangladesh Securities and Exchange Commission (BSEC) gave its consent to the allocation of shares in favour of the secretary of the posts and telecommunications division at a commission meeting on Wednesday.
As per the regulatory approval, the Submarine Cable will issue shares at Tk 75 each, including a premium of Tk 65, against share money deposits worth Tk 1.66 billion. The money was received between FY16 and FY17.
The government will get shares at a 53 per cent discount on the prevailing market price on the Dhaka Stock Exchange. The stock jumped 8.12 per cent to Tk 159.7 per share on the Dhaka bourse on Wednesday.
However, the outstanding amount of share money deposits is Tk 2.85 billion as of June this year.
A share money deposit is the money paid in exchange for shares that have not been acquired yet. The government injected funds into the company as share money deposit for implementation of various projects from time to time since the inception of the company in 2008.
The state-run company received Tk 1.40 billion from the government in FY16 under a project to install and establish the second submarine cable.
The Submarine Cable also received funds from the government under a development project titled 'Regional Submarine Telecommunications Project'. The project was initiated for installation and establishment of Second Submarine Cable System (SMW-5) for International Telecommunications in Bangladesh.
In FY17, the company received Tk 260 million for the same project.
Meanwhile, the company also received Tk 1.19 billion in the past three financial years --- FY22 to FY24 -- for implementing the project named "Installation of 3rd Submarine Cable for expansion of International Telecommunications system of Bangladesh".
Against this money, 15.90 million more shares will have to be issued, calculated considering the issue price of Tk 75 each.
"Existing shareholders' return on investment would be slashed after the issuance of shares as the number of outstanding shares would increase," said Md Sajedul Islam, managing director of Shyamol Equity Management.
Currently, the company's total number of shares is Tk 164.9 million, which will go up to 186.03 million. Hence, income will get diluted.
However, another analyst said the money already paid as share money deposit had contributed to investment expansion over the last seven years.
"Investors have already benefited from the investment," he added.
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 in return for its equity investment.
Financial Performance
The Submarine Cable's profit plunged 20 per cent year-on-year to Tk 1.68 billion in the nine months through March this year, owing to a reduction in revenue. Revenue slid 9 per cent year-on-year to Tk 2.67 billion in the nine months through March.
However, the company posted a record profit of Tk 2.79 billion in FY23, the highest since its listing in 2012. It paid a record 51 per cent cash dividend for FY23.
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