dividend policy decision

8/14/2019 DIVIDEND POLICY DECISION

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Presented by: Group 4Atreyee Nandy, J. Mrudula, Paul Dhinakaran, Priya

Bhutada,Rohan Phillip Mathew, Srikanth Srinivasan, Vineeth

Gangadharan

DIVIDEND POLICY DECISION


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MEANING OF DIVIDENDPOLICY


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INTRODUCTION

3 SCHOOLS OF THOUGHTPERTAINING

TO DIVIDEND

Dividend irrelevance theory

Dividends are undesirable

Dividends are good for the company


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MEASURES OF DIVIDENDPOLICY Dividend yield

Dividend payout ratio


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FEATURES OF DIVIDEND

Dividends Tend To Follow Earnings Dividends Are Sticky Dividends Follow a Smoother Path

than EarningsA Firms Dividend Policy Tends To

Follow The Life Cycle Of The Firm


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Company Analysis

Dr. Reddys Lab

Suzlon Energy

Hero Honda


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Dr. Reddys Lab

Company Overview

Five Year Analysis ( 2005 2009)

Criteria for the Analysis


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Year End Dividend(%)

Dividendpayoutratio

RetainedEarnings

(%)

DividendPer

Share(Rs.)

EarningPer Share

(Rs.)

Mar '05 100 0.584479 0.415521 5 8.55

Mar '06 100 0.18165 0.81835 5 27.53

Mar '07 75 0.053507 0.946493 3.75 70.09

Mar '08 75 0.132696 0.867304 3.75 28.26

Mar '09 125 0.187734 0.812266 6.25 33.29


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DIVIDEND PAYOUT (%)


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LIFE CYCLE ANALYSIS OF DIVIDEND POLICY


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2005

Dividend Percentage: 100

Dividend Payout Ratio: 58.45%

Retained Ratio: 41.55%

EPS: Rs.8.55

Dividend (per share): Rs.5

DIVIDEND TRENDS


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Share Prices Before & After Dividend Announcements( 2005)


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2006




EPS: Rs.27.53

Dividend (per share): Rs.5

DIVIDEND TRENDS


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Share Prices Before & After Dividend Announcements ( 2006)


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2006

Nov, 2005 Acquisition of Roches API, For US $61 million.

Acquisition of Betapharm, the fourth-largest genericpharmaceutical company in Germany.

A deal worth Rs. 2250 crore

Funding of Acquisition:

Internal funds

Rs. 886.6 crore (39.4%) External Sources

Debt from financial institutions

DIVIDEND TRENDS


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2007




EPS: Rs.70.09

Dividend(per share): Rs.3.75


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2007

Repayment of the debt raised forBetapharm funding

R&D budget increased to 7%

Market Expansion

DIVIDEND TRENDS


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2008




EPS: Rs.28.26

Dividend (per share): Rs.3.75

DIVIDEND TRENDS


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2008

40% dip in net profits and turnover ofthe company

Plans to invest significantly in biologicsand global generics

DIVIDEND TRENDS


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Net Profit


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2009




EPS: Rs.33.29

Dividend (per share): Rs.6.25

DIVIDEND TRENDS


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Share Prices Before & After Dividend Announcements (2009)


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2009

Use of internal cash reserves for acquisition

DowPharmas Small Molecules facilities in theUK

BASF Corporations manufacturing facility atShreveport in Louisiana, USA

Jet Generici SRL

Golden Jubilee Year-substantial increase inprofits

DIVIDEND TRENDS


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> Largest Wind Power and Wind Turbinemanufacturing Company in Asia (Fifth largestin the world)

> 12.3% share in the global 120 GW capacity

> Actively run by the Chairman and Managing

Director, Mr. Tulsi Tanti


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PERFORMANCE HIGHLIGHTS

PERFORMANCE HIGHLIGHTSIn Crores


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PAT v/s. DividendsDeclared


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Highlights of 2008-09

An year of high Investments

Increase in Loan funds , Financial Charges and Exceptional Expense Items

Resulting in a net Loss of Rs. Rs. 469.27 Cr.

The Management for the next year, has decided to use funds forDebt repayment and improving Working Capital position.

Dividends Declared: Nil


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> Increase in Financial Charges

Total Loans borrowed increased from 3084.74 Crs to 7329.48 Crs

- Increase in Financial charge from Rs. 596.94 Crs to Rs. 1053.94 Crs

Loan Type 2008-09 2007-08

12.5% secured redeemable

non-convertible debentures

300.00 -

Term Loans 579.94 22.06

Working capital Loans 3126.29 650.20

Zero Coupon convertible

Bonds

2535.50 2005.50

Other Short Term Loans 787.75 406.98

TOTAL 7329.48 3084.74


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> Exceptional itemsExceptional items increased to Rs 873.16 cr from Rs 285.21 cr.

Reasons:

Foreign exchange losses of Rs 131.35 cr. due to restatement ofzero coupon convertible bonds.

Provision for blade replacement cost aggregating Rs 221.59 cr. FromRs 121.71 cr. and consequential generation costs of Rs 189.51 cr.

Mark-to-market losses of Rs 330.71 crore from Rs 23 cr. in 07-08 inrespect of foreign exchange forward / option contracts.


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Investments

Completed acquisition of 91% stake in RE Power

Belgium based Hansey Transmission operationscommensed

SE forge;

Current Scenario

Q1 Loss: 462 cr

Stock Price corrected by 70% over the past 3 months

To raise 5000cr GDR,FCCB in Lux SE Rs. 970 Cr. CAPEX Plans


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Stock Volatility


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DIVIDEND POLICY


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An introduction

The company policy

The dividends declared


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Their dividend policy over the years:

2000 2001(150%)

2001 2002 (850%) 2002 2003 (900%)

2003 2004 (1000%)

2004 2005 (1000%) 2005 2006 (1000%)

2006 2007 (850%)

2007 2008 (950%)

2008 2009 (1000%)


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THANK YOU!

dividend policy decision

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