Indian Manufacturing Unit II

Indian Manufacturing Unit II - B11075 Assignment 8 Topic:...

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B11075 – Assignment 8 Topic: Dividend Policy and Related PAT, Net Income, Total Dividend, Basic EPS, Diluted EPS, Dividend Per Share, and the Dividend Payout Ratio has been calculated for Educomp, Everonn and Core Education from FY2007 to FY2011. All the figures used for computation have been taken from the balance sheets of the respective companies. Market prices and volume data, wherever used, has been taken from NSE archives 1 . Capitaline database has also been referred 2 . The excel sheet with all the detailed computations has been attached here: The major events that needed to be analyzed in this assignment include Share Buyback, Share Split and Bonus Issues. For the three companies analysed, the details of the events can be summarized as follows: FY2007 FY2008 FY2009 FY2010 FY2011 Educomp Stock Split 1:5 Everonn Bonus Issue 4:1 Core Education As seen above, neither company initiated a share buyback. Also, no company had any preference shares on their books over the last five years. Computation of PAT, Net Income, Total Dividend, Basic EPS, Diluted EPS, Dividend Per Share, and the Dividend Payout Ratio a) Educomp The table below gives the values of Profit After Tax, Total Dividend Paid, Number of Shares Outstanding, Basic and Diluted EPS, Dividend Per Share and Dividend Payout Ratio for Educomp. Educomp though has issued foreign currency convertible bonds and employee stock options . This has resulted in the Diluted EPS being lower than the basic EPS. Educomp (All fig in Rs.mn) FY2007 FY2008 FY2009 FY2010 FY2011 PAT 285.84 700.61 1315.88 2218.66 3888.68 (Preference Dividend) 0 0 0 0 0 Net Income 285.84 700.61 1315.88 2218.66 3888.68 Dividend 33.08 43.2 43.28 261.96 57.59 Dividend Tax 5.62 7.34 7.36 43.87 0 Dividend + Dividend Tax 38.7 50.54 50.64 305.83 57.59 Shares Outstanding 1598510 4 1724656 4 1728626 5 9501465 1 9554439 6 Face Value of Shares 10 10 10 2 2 Dividend Per Share (in 2.07 2.50 2.50 2.76 0.60 1 http://www.nseindia.com/content/equities/eq_scriphistdata.htm 2 http://www.capitaline.com/user/framepage.asp?id=1
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B11075 – Assignment 8 Rs) Dividend (% of FV) 21 25 25 138 30 Dividend Payout Ratio 13.54 7.21 3.85 13.78 1.48 EPS Basic 17.9* 41.38* 76.15* 23.99 40.74 EPS Diluted 15.87* 35.13* 74.32* 22.52 37.76 As there are no preference shares, PAT and Net Income for Educomp is the same. Also, PAT has shown a robust growing trend for the last five years. Dividends: Apart from FY 2010, the total dividend paid out per year has ranged in 30-60 million rupees. The dividend per share (as % of Face Value) has increased gradually from 21% in 2007 to 30% in 2011. The dividend payout ratio has been very low (below 10%) indicating that Educomp prefers reinvesting more than 90% of its net income to meet its expansion and growth needs. The policy followed by Educomp is closest to the constant dividend policy . Regardless of the net income, Educomp has tried to maintain a constant dividend (20-30% of FV) totalling to dividend payments between 30-60 million Rs, except
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Indian Manufacturing Unit II - B11075 Assignment 8 Topic:...

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