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Mumbai: FMCG major
Hindustan Lever Ltd (HLL), Indias biggest company in terms of
market capitalisation, is in news. In what is being seen as an
investor-friendly move, HLL has decided
- to issue bonus
debentures to its shareholders by drawing an amount of Rs
1,320 crore from its general reserves, and
- consider hiking the
FII investment limit in its equity to 49 per cent from the
current level of 24 per cent.
HLL is planning to
consider both the proposals in its 16 October board meeting.
The concept of bonus debentures draws its genesis from Sections
391 to 394 of the Companies Act, and will be subject to required
approvals by the shareholders and the Bombay High Court. The
company says the scheme has been constructed to enhance the
efficiency of the balance sheet in the context of excess cash
carried for several years.
It further states that
bonus debentures will not impair its ability to acquire other
companies if the need and an opportunity thus arise. Bonus
debenture would essentially be considered as deemed dividend,
due to which the company will have to shell out Rs 135 crore as
dividend tax. The total amount, which the company will end up
paying, will be Rs 1,455 crore.
Each bonus debenture, of
face value Re 1 each, will be redeemed in two installments of Rs 3
each at the end of the second and third year. Till they are
redeemed, the debentures will carry an interest rate of 9 per
cent.
As on 31 December 2000,
HLLs reserves were placed at Rs 2,268 crore, of which general
reserves were Rs 1,609 crore. HLL is a high profit-making company
having posted a net profit after tax of Rs 1,310 crore and Rs
1,070 crore in the year ended December 2000 and December 1999
respectively. In the six-month period ending 30 June 2001, its net
profit was Rs 806 crore.
Taking a cue from the
governments move to allow FIIs to invest up to the FDI sectoral
limit, HLL has decided to raise the FII investment limit in it to
49 per cent. As of now, FIIs hold about 13 per cent of its equity.
Unilever, the Anglo-Dutch parent, is the largest shareholder with
a stake of 51.57 per cent with a free-float, or public holding, at
around 21 per cent.
Following these two
decisions, the HLL stock moved up 6 per cent to touch Rs 224 on 10
October.
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