Dhaka bourse seeks regulator guidance on recategorizing Z stocks
The premier bourse had demoted over a dozen firms last month from A, and B category to the Z category after they failed to disburse the declared dividend for shareholders within the stipulated time mandated in listing rules.
The Dhaka Stock Exchange (DSE) has sought guidance from the Bangladesh Securities and Exchange Commission (BSEC) regarding the recategorization of Z category stocks, as some companies have disbursed approved dividends after being downgraded.
The premier bourse had demoted over a dozen firms last month from A, and B category to the Z category after they failed to disburse the declared dividend for shareholders within the stipulated time mandated in listing rules.
In a letter sent to the regulator in early October, the DSE sought clarification on whether companies that disbursed their declared or approved dividends and submitted a compliance report, even after missing the initial deadline, could be moved back to their original categories.
However, the BSEC is yet to opine or provide direction on the issue, according to DSE officials.
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The DSE, in late September, downgraded 14 firms to the Z category in a single day, as per a May 2024 BSEC directive which stated that any company failing to disburse at least 80% of declared dividends within the stipulated time must be downgraded to the Z category.
The total number of Z category or "junk" stocks on the exchange now stands at 86.
A top official of the DSE, seeking anonymity, said after downgrading the stocks to the Z category, the DSE sat in a meeting with the regulator when the stocks started facing price erosion amid huge sell-offs. The letter was sent in line with the meeting, seeking guidance regarding the placement and adjustment of the stocks, he added.
But the settlement of transactions regulations mandates that the placement of a company in G, N or Z category shall be adjusted to A or B category on the day following the date of submission of compliance report with the DSE.
The letter, which The Business Standard has seen recently, stated that the DSE shifted 18 companies to the Z category due to non-payment of dividend within the stipulated time in recent times.
On 25 September, the commission downgraded 27 companies — 14 for non-payment of dividend, and 13 for failing to declare dividend for two consecutive years.
However, the DSE observed that after being categorised as Z category, some of the companies have submitted compliance reports and disbursed at least 80% of the approved dividend.
According to DSE officials, the bourse has verified the supporting documents for category adjustment upon ensuring disbursement of approved dividend. They said the bourse will take necessary actions when the regulator provides a direction on the issue.
Today, Advent Pharmaceuticals, and Libra Infusion, both of which were downgraded to the Z category, announced that they have disbursed the declared dividends to its shareholders.
An official of the DSE, with knowledge on the issue, said the companies disbursed the declared dividend after the stipulated time frame and that is why, the bourse did not change the category of the companies.
However, just a day after downgrading Energypac Power Generation to the Z category on 25 September, the DSE returned the company to its previous B category after it disbursed the declared dividend for the general shareholders for 2022-23 fiscal.
