Cuts in system loss, corporate tax boost Desco profit

The Dhaka Electric Supply Company (Desco) – a listed power distributor – has reported a 62% growth in profit for FY21, thanks to the reduction in system loss and lower corporate tax.

Desco's net profit stood at Tk73.94 crore at the end of the last fiscal year, which was Tk45.56 crore in the previous year.

The company's system loss due to the transmission of electricity at high voltage recently decreased to a great extent.

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

Desco Managing Director Kausar Ameer Ali told The Business Standard, "In the first nine months of FY21, our business slowed down as the power demand decreased due to the Covid-19 pandemic."

"But in the April-June quarter, we turned around from the slump as the power consumption increased after the government had gradually withdrawn the restriction on movement."

He also said, "In that quarter, we could reduce the system loss on power transmission to 5.5% from above 6%. Besides, the government also cut the corporate tax. For these reasons, we achieved a handsome growth in net profit that was not expected amid the pandemic."

"Finally, we could declare dividends to our shareholders. But after examining the first nine months' performance, we were worried that the company may not declare any dividend for FY21," he added.

Desco's revenue also rose by 10% to Tk4,347 crore in the last fiscal year.

Its board has recommended a 10% cash dividend for the shareholders for FY21. To approve the dividend and the audited financial report, the company will conduct its annual general meeting (AGM) on 15 January 2022 through a digital platform. Shareholders will have to hold on to the Desco share till 18 November this year to attend the AGM.

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

Among them, around 91% of users are from the domestic level, 7% are from commercial and industrial levels, and other consumers make up the remaining 2%.

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

The Desco informed its shareholders that the company's sponsor, BPDB, owns nearly 26.38 crores of its 39.76 crores paid-up shares with a face value of Tk10 each.

The entire stake transfer is to take place outside the stock exchange's trading system with the approval of the Bangladesh Securities and Exchange Commission.

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

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

As the government preferred a company structure instead of autonomous bodies, ultimately the Desa handed over all of its assets and liabilities to two state-owned companies – Desco and DPDC.

The Desco, listed in 2006, currently has a paid-up capital of nearly Tk400 crore. Its share closed at Tk39.60 at the end of Thursday's trading session at the Dhaka Stock exchange.