IT company Agni Systems to set up dairy farm
The company has bought 45 bighas of land in Gazipur to set up the dairy farm that is expected to go into production by July 2020
Agni Systems Limited, an internet service provider, is setting up a dairy farm buoyed by the prospects in the dairy business.
The company, listed with both Dhaka and Chattogram stock exchanges, bought 45 bighas of land in Gazipur in between 2011 and 2019 to set up the dairy farm.
It has also bought some cows and the farm is expected to go into production from June or July next year.
Keep updated, follow The Business Standard's Google news channel
Mohammed Abdus Salam, managing director of Agni Systems, said, "As we lack knowledge on dairy business, a US consultancy firm will be appointed to run the dairy project. Initially, we will run the project on a small scale, on a test basis, for a few months.
Javed Bukth, chairman and independent director of Agni Systems, is already running poultry and dairy businesses under a company named Pentagon Poultry and Dairies Limited.
Another listed IT company Intech Limited has also been running a fisheries business since 2012. They are doing better in fisheries business than the IT business. Intech Limited has earned 50.46 percent of its total revenue from fisheries business in the fiscal year 2018-19. The revenue share was 52 percent in fiscal year 2017-18.
Prospects of dairy business
The Bangladesh Tariff Commission in a recent research found that yearly demand for milk in the country is 1.40 crore tonnes, while the per capita daily demand for milk is 250 ml.
At present, around 60.20 lakh tonnes of milk are produced in the country annually and thus the yearly deficit of milk production stands at about 80 lakh tonnes. Bangladesh has to import milk worth Tk1,500 crore per year to meet the demand.
The total number registered and unregistered dairy farms in Bangladesh currently stands at around 12 lakh.
Problems of IT business
IT businesses are facing difficulties for the last few years. In the current fiscal year, the National Board of Revenue has reduced Value Added Tax (VAT) on internet services from 15 percent to 5 percent. But the revenue board has stopped exempting VAT on major expenses such as bandwidth payments of the IT firms. This has had an impact on the IT bottom line quite drastically.
The IT industry is facing fierce competition as many Internet Service Providers (ISP) are operating without licence, proper service guidelines, and without paying VAT and income taxes.
This has impacted the revenue growth and profitability of legitimate businesses like Agni Systems.
Payments to Nationwide Telecommunication Transmission Network (NTTN) is one of the major expenses for IT businesses. In some cases, national data transmission rates have become more expensive than the prices of international bandwidth.
International call volume through Agni Systems ICX (Interconnection Exchange) business has also decreased drastically because of OTT (over the top applications such as Viber, WhatsApp) and grey channel operators.
Financial performance of Agni Systems
Agni Systems did not have any significant growth in its IT business in the last five fiscal years. During that period, the company earned Tk33 crore revenue on average.
In the 2018-19 fiscal year, the revenue of the company stood at TK37 crore, while it was Tk33 crore in 2017-18 fiscal year.
Forty percent of the company's total revenue came from the internet services and ICX business contributed 52 percent.
But the company saw a significant fall in its net profit in the last fiscal year due to an increase in costs.
The net profit of the company dropped by 22 percent from 6.95 crore in 2017-18 fiscal year to Tk5.40 crore in 2018-19 fiscal year.
The company board has now decided to set up a data centre to expand data service business. The company has bought new space to set up the data centre at Pragati Sarani in Dhaka.
The company paid a seven percent cash dividend to its shareholders in 2018-19 fiscal year. The company fell from `A' category to `B' category at the Dhaka Stock Exchange due to its failure to pay a minimum 10 percent dividend. The company had been paying at least 10 percent dividend to its shareholders over the previous four fiscal years.
Share performance
Agni Systems was listed with the Dhaka Stock Exchange in 2003. The paid-up capital of the company was Tk72.55 crore.
The maximum price of the company's share was Tk23.80 and minimum price was Tk14.20 at the Dhaka Stock Exchange over the last one year.
On Sunday, the closing price of its share was Tk14.70 at the Dhaka Stock Exchange.
Sponsor and director fail to hold minimum shares
Agni Systems' sponsor and director have failed to hold a minimum 30 percent shares of the company's paid-up capital. They hold only 9.39 percent shares jointly. Other shares are held by institutional and general investors.
The securities regulator, the Bangladesh Securities and Exchange Commission (BSEC) has declared it mandatory for sponsors and directors of a company to own 30 percent shares of the company's paid up capital.
If the directors of a listed company altogether do not own 30 percent shares, the company would not be able to increase its paid-up capital by issuing right shares and repeat public offerings.
On the other hand, the position of an individual director would be declared vacant if he or she fails to possess at least two percent shares. And in the next annual general meeting, those owning five percent or more shares would be nominated as the director, according to the BSEC order.
