State-owned firms jolt investors as quarterly losses deepen, exposing systemic weaknesses

Infographic: TBS

State-owned enterprises listed on the capital market have delivered another unpleasant surprise for investors, with July-September financial disclosures revealing widening losses, deteriorating efficiency, and deep structural flaws that continue to weigh on market sentiment.

According to data from 17 of the 20 listed government companies that have so far disclosed their un-audited quarterly results, only seven managed to stay profitable, while ten posted losses –  many of them alarmingly high.

Analysts say a deepening divide between efficient and distressed enterprises is now more visible than ever, raising fresh concerns about governance, debt risks and the long-term viability of several state-owned entities.

Market classification paints a similarly grim picture.

Nine listed state-owned firms, including Power Grid Company of Bangladesh (PGCB) and Dhaka Electric Supply Company (Desco), are currently trading under the "Z" category for failing to issue dividends. 

Five are in the "B" category with dividends below 5%, while only six qualify for the "A" category by offering above 10% payouts. 

For investors who value consistency and stability, the classifications serve as a blunt reminder that the majority of state-owned enterprises remain unreliable for long-term returns, said a senior researcher of a brokerage firm.

For investors evaluating the state-owned segment of the market, the July-September earnings season delivered a familiar message: while a handful of government companies show flashes of operational competence, systemic inefficiencies, political interference and outdated business models continue to drag the sector as a whole. 

Until structural reforms take place, analysts warn that state-owned stocks will remain high-risk and low-reward, leaving only a few bright spots in an otherwise troubled landscape.

A few bright spots

Yet even in this bleak field, a handful of companies managed to deliver notable turnarounds. 

Power Grid topped the list of profit makers, posting Tk364 crore in earnings – an extraordinary rebound from the Tk257 crore loss suffered during the same period last year. 

Power Grid's Company Secretary Jahangir Azad told The Business Standard that the improvement came from higher revenue in power transmission, as well as gains from fixed deposits and Treasury bond investments. The company also benefited from currency movements, reversing the losses it incurred when the dollar was stronger.

Oil marketing companies also posted strong results. Padma Oil, Meghna Petroleum and Jamuna Oil, all state-owned distributors, continued to benefit from the interest income generated through their fixed deposits, a non-operational lifeline that again overshadowed their core business performance.

Bangladesh Submarine Cable Company Ltd (BSCCL) also secured a solid profit of Tk68.58 crore, up from Tk47.55 crore a year earlier, showing a rare example of consistent performance among state-owned enterprises.

Desco, frequently criticised for operational inefficiencies, delivered an unexpected turnaround as well, booking Tk58.32 crore in profit compared to a Tk32.24 crore loss in the previous year's quarter. 

Investors, however, remain cautious, noting that one profitable quarter is far from enough to offset years of financial instability.

Heavy losses deepen investor alarm

But the positive examples were overshadowed by the heavy losses reported by other firms, particularly Titas Gas, Rupali Bank and Investment Corporation of Bangladesh (ICB). 

Titas Gas posted the largest loss among all state-owned entities, recording Tk249 crore in red ink for the quarter. The gas distributor cited a massive system loss of 10.13%, far above the allowable 2%, which forced the company to absorb substantial purchase liabilities without matching revenue. 

Adding to the burden, the company also faced higher liabilities due to tax deducted at source being treated as minimum tax under the new Finance Ordinance despite having no taxable income.

Rupali Bank's performance triggered further alarm among investors. The state-run bank plunged into a Tk168 crore loss, reversing a small profit from the same quarter last year. 

Insiders attribute the decline to skyrocketing default loans and rising operating expenses, both of which have worsened amid fragile banking-sector governance. 

With the government holding a controlling stake, concerns are growing that taxpayers, not shareholders, will ultimately bear the cost of the bank's chronic mismanagement, said a managing director of a brokerage firm.
ICB, once the backbone of Bangladesh's stock market, reported a Tk153 crore loss as interest income, dividend earnings and capital gains all fell sharply. 

Investors lament that ICB's declining financial health limits its ability to stabilise the market during downturns – one of its core mandates.

Several chronically struggling state-owned companies remained deep in the red. 

Bangladesh Services, Zeal Bangla Sugar, Shyampur Sugar, Usmania Glass and National Tubes all reported losses, with the latter four already out of operation. 

These firms have long been seen as fiscal liabilities rather than functioning businesses, but the latest earnings reinforce doubts about whether they will ever regain viability.

Market reaction

Share prices reflected investor frustration. National Tubes, Renwick Jajneswar, ICB, Zeal Bangla Sugar, Desco, Power Grid, Titas Gas, Usmania Glass and Rupali Bank all traded near their one-year lows following the earnings releases. 

Still, a few outliers remain. Eastern Lubricants continues to hold the highest share price among state-owned firms at Tk2,530.90, followed by Renwick Jajneswar at Tk479. 
Meghna Petroleum, Padma Oil and Jamuna Oil also maintained relatively strong share prices, supported by investor belief in their stable cash reserves and interest income streams, even if core operations remain stagnant.