Why did graphite india limited raising 5000 crore on one side and paying a hefty dividend of rs 35 per share on other side
As per report the company is raising 5000 crore for its capex and expanding its operations but inspite of raising the amount they should fund the same by paying lesser dividend??
Whats the opiniion
Agree . less dividend or even a proportionate styled buyback is a better choice. Dividend is a convenient and fancy word wherein without any act on part of shareholder money goes into his/her bank account .
to pay rs 35 per share dividend the company has to extract 42.196 from reserves and those getting 10 lakh or plus dividend in a year from portfolio need to pay another 10% dividend tax. thus much less money come in the hand of shareholder than what is extracted from reserves of company .
@sabkaview but my question is if the company wants 5000 crore why it need to raise from the market
They may pay lesser dividend say 5 rs or 10 rs and so remaining 30 or 25 rs can be funded towards the amount that the company raises from the market…
@vaibhavi_Shah These are management decision based on various factors which may include short term support of market behavior of share , demand of big holders and feeling of satisfaction among small shareholders who like to have direct cash credit in bank without any act on there part.
Last week itself EXPLEO SOLUTIONS ( sqs )Management has indicated in last concall, No dividends for next 3 years, only buyback in lieu of dividends . many believe it has to do with constant demand of Rajasthan global securities .
Ok thnx but as u mentioned in your answer can u xplain in what context short term support of market behaviour of share,and demand of big holders…??
Demand of big holder is already explained by live example of Expleo solution and short term support clearly means attempt to maintain market price by corporate action be it Big dividend , buyback or bonus announcement…
Ok thnx
@sabkaview can there be a possibility that the holiding of promoters in Graphite india is 65.22%so they may want a risk free return and so decleared hefty dividend??
@vaibhavi_Shah : In my view all these are guess work on why management took such a decision and sometime accurate as in live case of MINDTREE -LARSEN take over where management of Mindtree declared unusually high special dividend of rs 20 per share so as to empty the coffers which may make larsen have second thoughts on take over. we and media can talk about management approach under given situation till cows come home but ultimately it is their prerogative .
of course these recommendations /decisions are subject to resolution by simple /special /agm approval .Is there any case where AGM has revised /cancelled the DIVIDEND?
It is not quite logical. However, we dont have insight information so we can only guess what is going on. It might be that one of demands from shareholders is for dividends to be paid out. Otherwise, if shareholders are demanding high ROE, then company might be looking for cheaper source of funding