Regulator scraps Dominage Steel’s stock dividend proposal

The market regulator turned down a proposal of a 5% stock dividend by Dominage Steel Building Systems last week – to protect the interest of its investors.

It recommended a 10% dividend – 5% cash and 5% stock – for the last fiscal year that ended in June 2021.

The manufacturer of pre-engineered steel buildings structure had recently sought approval from the Bangladesh Securities and Exchange Commission (BSEC) for the stock dividend.

The company, engaged in the prefabricated steel structure business, had raised Tk30 crore from stock exchanges through an initial public offering (IPO) in August 2020.

It could not use the IPO funds due to the Covid-19 pandemic even after taking approval from its shareholders and the regulator.

Sources said the commission deems that the company has an available IPO fund. The firm could not make expected business amid the pandemic.

In this situation, the stock dividends will not be an effective way for business. It will increase the paid-up capital of the company which will affect the future dividend, added the sources. 

A senior official at Dominage Steel, speaking on the condition of anonymity, said the company will follow the regulator's instruction in this regard.

The company had recommended the stock dividend to buy a dredger for generating income that is a part of its business. Now the company operates by renting a dredger, he added.

He further said the company started using its IPO fund in January this year.

Dominage Steel will spend the funds on constructing a building as well as buying electrical equipment and new machinery.

In July-December of 2021, the revenue of the company was Tk23.07 crore down from Tk26.17 crore a year earlier.

Its net profit was Tk3.04 crore compared to Tk6.30 crore in the final six months of 2020.

In addition, its earnings per share were Tk0.30 and net asset value per share was Tk16.99 as of 31 December 2021. And the retained earnings was Tk71.67 crore.

As of 31 January 2022, sponsors and directors jointly held 30.20%, institutions 19.43%, foreign investors 0.01%, and general public 50.36% shares in the company.

The last trading share price of the company at the Dhaka Stock Exchange was Tk24 on Thursday. 

Steel structure buildings are in high demand in Bangladesh's construction sector as they need smaller investment and time yet provide great safety.

The high resale value of steel structures also drives their popularity.

Local steel building makers are expecting a bright future for steel structure buildings as an increasing number of conglomerates, including foreign companies, are setting up such structures for industrial use.