The stock market regulator has approved DESCO's plan to issue 45.9 million more preference shares to the government worth Tk.459 million at Tk.10 each in a regulatory filing showed Wednesday.
The move converts the government's share money deposits in the state-owned power distributor into formal capital, letting it earn returns through dividends. These are irredeemable, non-cumulative preference shares holders get dividend priority over common shareholders but cannot claim missed payments later. Though not counted as equity, the shares add to DESCO's fixed payment obligations and will reduce returns for existing shareholders.
The government has funded DESCO since its 1996 inception to expand electricity distribution. It had earlier issued 607.69 million such shares to the company. The latest move follows a 2020 Financial Reporting Council directive requiring state entities to convert idle share money deposits into capital.
The approval comes as DESCO shows signs of financial recovery. After a record Tk.5.41 billion loss in FY23 and a Tk.5.05 billion loss in FY24 both driven by foreign exchange losses on foreign debt the company's loss narrowed to Tk.1.25 billion in FY25. In the nine months through March this year, DESCO posted a Tk 580 million profit, reversing a Tk.787 million loss a year earlier also helped by higher revenue and lower exchange losses.
Despite FY23's loss, DESCO paid a 10 percent cash dividend from retained earnings no dividend was declared for FY24. Profitability remains sensitive to currency swings and costs.
DESCO shares fell 0.43 percent to Tk.23 on the Dhaka Stock Exchange after the disclosure.
