Submarine Cable seeks 14 months to issue shares to government

The Bangladesh Submarine Cable Company Ltd (BSCCL) has sought 14 months from the Financial Reporting Council (FRC) to issue shares against share money deposits of the government in order to comply with the recent directive of the accounting regulator. 

The listed state-owned company also sought guidelines on how the issue price of the new shares should be fixed. 

State-owned listed companies are in a dilemma about the issue price of the fresh shares against the capital the government had injected from time to time. 

The dilemma is about the issue price. If it is set at face value or lower than the current market valuation, general investors will be harmed. 

On the other hand, if it goes too high, the government, which did not receive any dividend in years despite injecting money, will feel that it is being deprived. 

Submarine Cable sent a letter to the FRC last week. 

FRC Executive Director Sayeed Ahmed, FCA, told The Business Standard that the council had received the letter from the company and the matter would be raised at the next council meeting where the members would decide on the issue.

On February 11 this year, the FRC issued a directive that companies must issue shares against share money deposits within six months, and the money cannot be retractable and returnable.

Also, companies must think of the share money deposit as potential share capital, and they must include the amount in their calculation of earnings per share accordingly.

On July 29, Submarine Cable sent a letter to the FRC where it mentioned its inability to issue shares in favour of the government before settlement of the audit objection raised by the Foreign Aided Projects Audit Directorate (FAPAD).

In the letter, the company said it received Tk166 crore in equity money in 2015-2017 under the Installation and Establishment of the Second Submarine Cable System for International Telecommunication in Bangladesh project.

When FAPAD on September 22 found that Tk8.57 crore of the total amount remained unused, it asked the company to pay the amount to the government.

Submarine Cable then wrote to the FAPAD to settle the issue that remained under consideration. It said in the letter that the amount of total equity money could be finalised after the audit objection was resolved.

The project cost less than the amount received from the government, and FAPAD wanted the company to pay the amount back to the government's account.

But Submarine Cable wanted to issue shares against the final amount of share money deposit after the settlement of the audit objection.

As it is a listed company, it has to prepare an audited financial statement, do asset valuation, take approval from shareholders and the government, and finally get approval from the securities regulator to issue shares against the government's share money deposits. Time is needed to complete all the procedures.

The company said there would be adverse impacts on the stock market if it included share money deposit in calculation of earnings per share before settling the audit objection, fixing issue price and getting necessary approvals.

Hence, it appealed to the FRC to consider the matter.

On June 16, the FRC wrote to the finance ministry that six listed state-owned companies are yet to issue shares against Tk6,652 crore share money deposits of the government, depriving the government of ownership and dividend income.

The government was deprived of dividends worth Tk1,115.51 crore in FY19 and Tk948.92 crore in FY18 as the six companies did not issue shares.

The government did not own shares against its investments in the companies, the FRC said.