Why Titas Gas incurs substantial losses
Despite incurring substantial losses, its board recommended that a 5% cash dividend, equivalent to Tk49 crore, be paid from its retained earnings
By increasing the distribution margin by Tk0.08 per cubic metre, Titas Gas Transmission and Distribution Company — a publicly listed, state-owned gas distributor — hoped for a revival, aiming to shift from losses to profitability.
The hopes of Titas Gas, which enjoys a monopoly in pipeline gas distribution in Dhaka and Mymensingh since its establishment in 1964, were dampened as the company ended up witnessing a record loss of Tk744 crore for fiscal year 2023-24.
Despite incurring substantial losses, its board recommended that a 5% cash dividend, equivalent to Tk49 crore, be paid from its retained earnings.
Until FY23, its retained earnings were Tk5,744 crore, according to its annual report.
Keep updated, follow The Business Standard's Google news channel
Since inception, the gas distributor incurred a loss of Tk165 crore for the first time in FY23 and paid a 5% cash dividend to its shareholders.
Regarding the losses, Arpana Islam, general manager (finance) of Titas Gas, told TBS that Titas Gas faced a substantial loss due to being brought under the minimum tax rate.
She explained that Titas Gas customers pay a 3% source tax on gas bills to the National Board of Revenue (NBR), which was previously adjusted with the taxes for the company.
"However, with the decision to impose a minimum tax, the NBR considered the source tax paid by the customers as final taxes. So the company showed the amount as expenses."
As per calculation, customers of Titas Gas paid around Tk820 crore as source tax on gas bills in FY24, and the entire amount was considered as taxes, according to officials.
As a listed company, Titas Gas is mandated to pay 20% taxes. If the company were to pay tax at a 20% rate, Titas Gas would be paid Tk38 crore as taxes, and it would able to make a profit, said an official of Titas Gas.
However, due to the minimum tax, it incurred huge losses and declared dividend would be paid company's retained earnings, said Titas Gas officials. Owing to such a decision, the publicly listed firm turned to loss-making firms, they said.
If it continues, the company will not pay any dividend to its shareholders, say the officials.
In FY23, Titas Gas took a blow as its distribution margin halved to Tk0.13 per cubic metre from Tk0.27.
In July 2023, after six months of gas price hike, the highest-ever at the retail level, the government increased the distribution charges for gas production, transmission, and distribution companies.
The additional charges have been effected for gas consumption since July.
In an order issued by the Ministry of Power, Energy, and Mineral Resources, Titas Gas, the largest and only gas distribution utility in the country, will get an additional Tk0.08 per cubic metre of gas sales, as its distribution charges have been increased to Tk0.2100 from Tk0.1300 per cubic meter.
The officials said that with the increase in distribution margin, Titas Gas managed to make a profit as its sales increased significantly.
AGM scheduled for 24 December
Titas Gas has published its earnings per share and financial issues but is yet to publish a full report including revenue and others.
The annual general meeting (AGM) of the company is scheduled for 24 December and its record date has been fixed for 17 November.
Its net asset value per share increased to Tk98.15, which was Tk71.75 in FY23.
In the first nine months, Titas Gas's revenue jumped 55% to Tk26,516 crore but it incurred a loss of Tk165 crore due to increasing in system losses and the rise in gas end-user prices.
Meanwhile, in the third quarter during January to March of FY24, it incurred a loss of Tk212 crore.
In nine months, its net loss declined because it made a profit in the first two quarters during the July to December period.
Titas Gas was listed on the Dhaka and Chattogram bourses in 2008 under direct listing by offloading 25% of shares in the stock market.
Currently, Petrobangla holds 75% of the company's shares.
Titas Gas transmits natural gas from the gas fields to different areas for power, fertiliser, industrial, commercial, captive power, feed gas for CNG, and domestic consumers.
On Thursday, its shares closed at Tk20.40 each on the Dhaka Stock Exchange (DSE), down by 3.32% over the previous trading session.
