Corporate Tax

Cut back system losses, corporate taxes enhance Desco revenue

Dhaka Electric Supply Company (Desco) – a publicly traded power distributor – reported earnings growth of 62% for FY21 thanks to a reduction in system loss and lower corporate tax.

Desco’s net profit at the end of the last financial year was Tk 73.94 billion, compared to Tk 45.56 billion in the previous year.

The company’s network losses due to the transmission of high-voltage electricity have recently fallen sharply.

In addition, the government decided in its last budget to cut corporate income tax for listed companies by 2.5 percentage points to 22.5%.

Desco CEO Kausar Ameer Ali told The Business Standard, “In the first nine months of FY21, our business slowed as electricity demand declined due to the Covid-19 pandemic.”

“But we came back from the slump in the April-June quarter when electricity consumption rose after the government gradually lifted the movement restriction.”

He also said, “This quarter we have reduced our power transmission system loss from over 6% to 5.5%. The government has also cut corporate taxes. For those reasons, we have seen significant net profit growth amid the pandemic not to be expected. “

“We were finally able to pay dividends to our shareholders, but after reviewing the performance for the first nine months, we were concerned that the company might not pay a dividend for FY21,” he added.

Desco’s sales also rose by 10% to Tk 4,347 billion in the last financial year.

The board of directors has recommended a cash dividend of 10% to the shareholders for FY21. To approve the dividend and the audited financial report, the company will hold its annual general meeting on January 15, 2022 via a digital platform. Shareholders must hold Desco shares until November 18 of this year in order to be able to attend the Annual General Meeting.

The Desco is one of six power distribution companies in Bangladesh and provides power to most parts of Dhaka North City Corporation. The distributor has around 10.53 lakh consumers.

This includes around 91% of users from within Germany, 7% from the commercial and industrial sectors and the remaining 2% from other consumers.

Earlier this year, on September 1, the Bangladesh Power Development Board (BPDB) announced that it would transfer its entire 67 percent stake in Desco to Dhaka Power Distribution Company Ltd (DPDC).

Desco informed its shareholders that the company’s sponsor, BPDB, owns almost 26.38 crores of its 39.76 crores paid-up shares with a nominal value of Tk 10 each.

All transfer of shares is to take place outside of the exchange’s trading system with the approval of the Bangladesh Securities and Exchange Commission.

Both Desco and DPDC are spin-offs from the now dissolved Dhaka Electric Supply Authority (Desa).

The Desa, an autonomous body, was founded in the early 1990s to take over the power distribution network in the city of Dhaka and some surrounding areas from the then Power Development Board (PDB).

Because the government preferred a corporate structure to autonomous bodies, Desa ultimately turned over all of its assets and liabilities to two state-owned companies – Desco and DPDC.

Desco, listed in 2006, currently has paid-in capital of almost Tk400 crore. The shares closed at Tk 39.60 at the end of the trading session on Thursday on the Dhaka stock exchange.

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