Express Insurance, which made its trading debut at Dhaka Stock Exchange (DSE) just last month, has been asked by the stock market regulator to appoint an auditor to find some monetary benefit for shareholders for the year it got listed.
The recommendation made by the insurer's board of directors on Monday to not provide any dividend for the year ending on December 31, 2019 hurt investors and goes against their interests, according to experts.
Investments are usually made based on a company's performance in the preceding year, for which, in this case, the dividend in question is for 2019.
For a company to announce no dividend for the year it got listed is a rare instance, said market analysts.
On February 18, Express Insurance got the nod to go public in order to raise Tk 26 crore in funds from the stock market. It first featured on the DSE's trading board on August 24.
The company's share prices jumped to Tk 30 within less than a month of being listed, when its face value was just Tk 10. Till date it has reserves of Tk 34 crore, as per data from the DSE.
The Bangladesh Securities and Exchange Commissioncontacted them yesterday and held a meeting to address the issue.
"The company's no dividend announcement in the listing year despite being profitable hurts investors and so we talked with them," said Mohammad Rezaul Karim, a spokesperson for the BSEC, adding that the discussions were fruitful.
After the meeting, several officials of Express Insurance informed that the stock market regulator asked them not to deprive investors of dividends and give them some good news instead.
"We are appointing an audit firm to find a way to give something to the investors while abiding by the laws," they said.
As per the securities rules, a listed company cannot increase its dividends after its board of directors makes a recommendation on it.
However, the dividend can be reduced by the shareholders through annual general meetings, said a stock broker.
On the other hand, the company could provide interim dividends based on quarterly performance reports.
As the company has a reserve and surplus of funds, it might be allowed to provide interim dividends for the first or second quarter of 2020, he added.