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Surplus money withdrawal bill stokes stock investors' fear

  • Published at 12:05 pm January 17th, 2020
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The bill was sent to the respective parliamentary standing committee and the committee was asked to submit its report within seven days

Stock investors of state-owned companies are in fear about the fate of their investment as the government is planning to take the surplus money of 61 state agencies to the national exchequer for development projects.

Stakeholders in stock market have expressed concern, saying that the withdrawal of money from the publicly traded companies will deal a big blow to investors’ interest and impact the overall market negatively.

On Tuesday, Finance Minister AHM Mustafa Kamal placed a bill in parliament titled “Deposition of Surplus Money of Self-Governed Agencies including Autonomous, Semi-Autonomous and Statutory Government Authorities and Public Non-Financial Corporations to the National Exchequer Bill 2020”.

The aim of the bill is to bring the surplus money held by 61 state agencies to the national exchequer to use it for development projects.

The bill was sent to the respective parliamentary standing committee and the committee was asked to submit its report within seven days.

According to Dhaka Stock Exchange (DSE) data, there are 17 non-financial state-owned companies and corporations, of which 13 have surplus money to the tune of Tk13,558 crore.

As per the bill, the government could withdraw 75% of the total amount and deposit to the national exchequer. The additional 25%, however, will be left to be used as operational funds.

Surplus money of listed companies

As per DSE data, Bangladesh Shipping Corporation (BSC) has a surplus fund of Tk251 crore, where government holds 52.10% share and the rest is held by general, institutions and other investors.

Padma Oil has a surplus fund of Tk1,147 crore, followed by Tk1,116 crore of Meghna Petroleum, Tk1,888 crore of Jamuna Oil, while Eastern Lubricants has Tk15 crore as surplus fund.

Power Grid Company’s surplus fund is Tk787 crore, while Titas Gas has Tk5,791 crore, Dhaka Electric Supply Company Limited (DESCO) Tk1,197 crore and Atlas Bangladesh has Tk392 crore in surplus.

Eastern Cables has Tk49 crore, National Tubes Tk520 crore, Renwick Jajneswar Tk4 crore and Bangladesh Submarine Cable Company has Tk401 crore in surplus. 

In total, they have Tk13,558 crore in surplus.

Why investors anxious

“I am very much apprehensive about my share of Titas Gas, a state-owned company, as I came to know that the government is going to take the surplus money,” Mohammad Khairul Alam told Dhaka Tribune.

If the government took away the money, it would cast a negative impact on the share prices as surplus money was the money of shareholders also, said Khairul.

"As there is no clarification about it, as a small investors, I am very much concerned about the share price and the return of my investment," said the investor urging the government not to take away money.

"If the government must take money, it should take only its portion and ensure that shareholders' money is not taken," he demanded.

What stakeholders say  

"Withdrawing money from such organizations will have negative impact on the share price of such companies. AS a result, individual shareholder will lose their equity and the whole capital market will fall into the bearish mode," Mohammad Ali Chief, executive officer of Dhaka Bank Securities Limited, told Dhaka Tribune.

Requesting anonymity, a stock broker said the government should not withdraw fund from a company by putting the interest of general shareholders at risk. 

"This will completely jeopardize the rights of the shareholder enshrined in the Companies Act 1994, Section 233," he said.

Ahsan H Mansur, executive director of Policy Research Institute, told Dhaka Tribune: "This kind of move is totally illogical and a symptom of the crisis the government is going through. It will not be stock market-friendly."