Two BSRM companies plan merger to capitalize on tax benefits

The Bangladesh Steel Re-Rolling Mills (BSRM) Ltd and its subsidiary company, BSRM Steel Mills Ltd, are going to merge to avail tax benefits.  

While BSRM Ltd is listed with the stock market, BSRM Steel Mills is a non-listed firm. 

The merger will help cut costs by reducing corporate taxes, as unlisted companies have to pay 35% corporate tax, but firms listed with the capital market pay only 25%.

Speaking to The Business Standard, Shekhar Ranjan Kar, company secretary of BSRM Ltd said that if both companies merge, their management costs will also come down. 

An appeal will be made to the Higher Court, as per the Company Act. Upon receiving directives from the court, a special general meeting will be held to take approval of the shareholders before the merger takes place.

At present, BSRM's paid up capital is Tk395 crore. It holds 44.97 percent share of BSRM Steel Mills Ltd, and the remaining 55.03 percent share – owned by other shareholders – will be merged with BSRM Ltd. 

A valuer will be appointed for the purpose for determining the price of the 55.03 percent shares. 

After the merger, BSRM Steel Mills Ltd will not remain as a non-listed company anymore, the company secretary said. 

"The shares of BSRM Steel Mills Ltd will then be blocked for three years," he added.

BSRM Steel Mills Ltd produces billet, a raw material for manufacturing rods. The company went into commercial production in 2016. In the next two years the company suffered a loss of Tk98 crore. 

However, in 2017-18 fiscal, BSRM Steel Mills made a net profit of Tk94 crore, after paying taxes. At present the company produces 860,000 metric tonnes of billet per year. 

The paid up capital of BSRM Ltd, which produces mild steel rods, is Tk236 crore. 

The company has recommended giving 25 percent cash dividends to the shareholders for the 2018-19 fiscal. 

The record date for receiving dividends has been fixed on October 27 this year. The company's earnings per share (EPS) stood at Tk7.88 in the 2018-19 fiscal. 

The company will hold its annual general meeting in Chattogram on December 19.

At the Dhaka Stock Exchange, BSRM's shares closed at Tk65.40 on Tuesday. In the past year, the highest price of the company's shares hit Tk107.

Earlier in 2017, BSRM Group's other two firms – BSRM Steel Ltd and BSRM Iron and Steel Company Ltd – merged, of whom, BSRM Steel Ltd was listed with the share market, while the other firm was non-listed.  

BSRM Ltd holds 31.19 percent share of BSRM Steel Ltd. 

Most of the rods produced by BSRM Steel is exported. The company mainly exports rods to seven Indian states bordering Bangladesh. 

BSRM Steel's board of directors on Monday afternoon recommended disbursing 25 percent cash dividends to its shareholders for the 2018-19 fiscal. 

During this period, the company's EPS stood at Tk4.60.