Stock market listing of Robi Axiata Ltd may face setbacks if the government does not respond to the company's request to rationalise the minimum tax on turnover and corporate tax.
Robi's management convinced its board to get listed with the hope of two positive developments. It will apply for the planned initial public offering (IPO) very soon, where the above mentioned two points will be attached as conditions, said the company officials at a press conference on Saturday.
Also, the company will wait for the government's positive response at the same time, said Robi CEO Mahtab Uddin Ahmed.
If the government does not consider the profitability issue by the time of IPO procedure, Robi executives will submit the updates to their board, and there is a significant risk that the board may choose to opt out of the listing plan.
The two conditions
In general, listed companies in Bangladesh are enjoying a corporate tax incentive – 10 percentage points less than their non-listed counterparts.
But the government in the national budget for the 2018-19 fiscal year had cut it to 5 percent for telecom operators.
Now listed telecom operators are paying 40 percent corporate tax instead of the previous 35 percent. Robi wants it to be rationalised for at least 10 years.
Besides, the company now wants the 2 percent minimum tax on turnover to be slashed, which is eating away 90 percent of its operating profits.
After paying all the taxes, the company now has only 4 percent of the operating profit as net profit after tax.
In the last budget, the government increased the minimum tax on turnover for telecom operators to 2 percent from 0.75 percent.
The planned IPO
Robi, with its existing paid-up capital of Tk4,714 crore, decided to offer a total of 52.38 crore new shares in the IPO at face value of Tk10 each.
After the IPO, its paid-up capital will be Tk5,238 crore, while its current net asset value is around Tk6,000 crore.
In 2019, Robi made a net profit after tax of Tk17 crore only, which was over Tk100 crore for the first nine months of the year.
"We had to pay a considerable amount to 200 plus outgoing employees and spend a lot on running some campaigns in the fourth quarter of 2019. Seasonality also impacts fourth-quarter business in the telecom industry," said the Robi CEO.
There are concerns among capital market analysts over Robi's comparatively low profit figures against its very high paid-up capital that may generate low earnings per share.
However, Robi's CEO requested not to depend too much on numbers while analysing the company's strengths.
The company's two brands, Robi and Airtel, proved their strengths in the target markets, said the company officials.
Because of its superior network, every five out of seven telecom industry subscribers are now choosing Robi when they are changing operators under mobile number portability facility.
Airtel is highly positioned among the youth market segment because of its suitable offers and activities, said company officials.
Team heads of the company also talked about the company's continuous expansion efforts in cloud services, digital platforms, enterprise solutions, and many other potential areas.
Robi expects to complete its listing process within this year if everything goes right.