The Dhaka Stock Exchange is set to revise the rules for category changes of shares to eliminate the ambiguity that forced the bourse management to keep Lafarge Surma Cement in the junk territory despite the company's dividend disbursement.
The ambiguity first came to light last month after Lafarge announced 5 percent interim cash dividends, the disbursement of which was completed two weeks ago.
“Our regulatory affairs department is working on modifying some provisions of the settlement rules to make it more clear about listed companies' category changes following dividend declarations and disbursements,” said Swapan Kumar Bala, managing director of DSE.
As per settlement rules, companies that hold annual general meetings (AGMs) regularly but declare dividends below 10 percent for the last calendar year will be placed in the B category.
“But Lafarge announced dividends for the existing year and the dividend was interim -- not final. These two issues created confusion over Lafarge's category,” he said, adding that the existing rules do not say anything about interim dividends.
Moreover, the words “in last calendar year” should be changed to “for the company's last year”, as the company's accounting year can start from any month it decides.
“So, the calendar year is not the appropriate term.”
The case of Lafarge was also a unique one, as it is the first Z category company that announced interim dividends: usually, A-category companies declare interim dividends and it “never created confusion”.
The Z category is an area for companies that do not hold AGMs regularly and declare dividends, while A-category is the territory for firms that hold AGMs regularly and announce at least 10 percent dividends.
The trading cycle or settlement period for A and B category is T+2 and for Z category T+9.
The T+2 categorisation means the buyer must make payments and the seller must transfer ownership of the stock to the buyer within two days after the trade was made.
If a company is transferred to A or B category from the Z category, its trading cycle or settlement period will also change to T+2 from T+9.
The changed trading settlement period enhances the liquidity flow to the market and increases the supply of shares.
Lafarge Surma, which manufactures the Supercrete brand cement, declared its maiden dividend of Tk 0.50 per share on June 10 after a decade of being listed as the lone green field company on the stockmarket.
The multinational company, which started commercial operations in 2007, announced the dividend after it covered up accumulated losses at the end of May.