CONTENTS
1.0 Introduction
1.1 The Study
5
1.2 Objectives of the Project
6
1.3 Hypothesis
7
1.4 Methodology
8
1.5 Limitations of the Study
12
2.0 Theoretical Aspects
3.0
2.1 Terms of Dividend
14
2.2 Dividend and Retained Earnings.
17
2.3 Forms of Dividend
19
2.4 Dividend Policy & its different types
22
2.5 Considerations in Dividend Policy
25
2.6 Legal, Contractual and internal constraints
27
2.7 Dividends Models
29
2.8 Legal and Procedural aspects.
37
2.9 Factors affecting share prices
39
Analytical study of selected companies
3.1 Shipping Corporation of India
43
3.2 ONGC
48
3.3 Infosys Technologies Ltd
54
3.4 Reliance Industries Ltd
63
3.5 State Bank of India
79
3.0 Conclusion
91
4.0 Bibliography
92
1. 1
INTRODUCTION
One of the major objectives of any firm is to earn profits and to the extent possible try
to maximize profits. Having earned sufficient profits the firm may decide to go for
distribution of profits among the owners i.e. the shareholders, if the firm is a corporate
entity. In company’s shareholders are real entrepreneurs so distributing earnings must
compensate them. Different types of investors expect investing their savings with
different objectives. But majority of profit takes various forms such as payment of
cash dividend, giving of bonus shares to the existing shareholders, issuing right shares
at a considerably lower than the market price to the shareholders, issuing convertible
debentures etc.. The firm or a corporate entity may take decision regarding
distribution of profit in the context of various considerations like preferences of
shareholders and the potential growth of the company in future. Various firms are
working under different situations and therefore their distribution of dividend differs
widely. It is therefore to study how corporate entities take such decisions.
The Indian Economy consists of wide variety of industrial sectors like steel, chemical,
cement, automobiles, pharmaceutical, FMCGS, textile etc.. It was not possible to take
a very big size of sample for study, as data would not be available for all of them for
comparison. Hence, five companies were selected and an attempt is made to study
their dividend policies and their impact on their share prices.
1.2 OBJECTIVES OF THE STUDY
The division of net earnings of a firm between dividend payments and retained
earnings is a major financial decision. If the principal objective of a corporate
financial management is to maximize the market value of equity shares, the question
that naturally arises is: what is the relationship between dividend policy and market
price of equity shares? This is one of the most controversial and unresolved questions
in corporate finance.
The present study is basically focused on the following:

Nature and types of dividend polices

Determinants of dividend policy

Implementation of Dividend Models in the units concerned

Analytical study of the units

Impact of dividend policies on the share prices of the units concerned
1.3 HYPOTHESIS
On the basis of above mentioned objective the following Hypothesis have been
framed.
1) The dividend policies of companies of the same level and belonging to the
same industry or sector tend to be the same.
2) There is no particular or common factor or see of factors that significantly
have an impact on the dividend policy of all companies belonging to the same
industry in the same direction or proportion.
3) There is no relationship between earnings and dividend per share and there is
no proportionality between earnings and dividend payouts.
4) Dividend has no influence on the market price of stocks i.e. dividend is
irrelevant and has no effect on the price of a firm.
1.4 SCOPE OF THE STUDY AND METHODOLOGY
To test the above mentioned hypothesis of dividend policy and to understand the
dividend behaviors of the firms under study various statistical tools have been used in
addition to ratio analysis.
The study has examined individually the various theoretical determinates of dividend
policy such as profitability, size of the firm, leverage, growth and stability of earrings,
liquidity, taxation, pattern of shareholding etc.
1.
Sample
The methodology of the study was fairly simple. I have selected different five
companies from different sectors. Some of them have shown excellent results and
some other has moderate ones.
The selected companies are as follow

STATE BANK OF INDIA

SHIPPING CORPORATION OF INDIA

RIL INDUSTRIES

ONGC.

INFOSYS.
2.
Selection of Models:
For the study of dividend and its impact on share prices four models have been
selected. Analysis of data has been done on the basis of this model. The selected
models are as follows:

Yield Value Method

Intrinsic value Method

Walter Model

Gordan Model

Traditional Model
For the calculation purposes following arithmetic formulas are taken into
consideration:
1) Yield Value Method
Yield value = Rate of Dividend (%) X Paid up value of equity share
Expected Rate of Dividend
Here, Expected rate of Dividend = Interest Rate on Bank Loans
Rate of Dividend
= Divisible Profit (PAT) X 100
Total Paid up capital
2) Intrinsic Value Method
Intrinsic Value =
Net Assents
No. of equity shares
3) Walter Model
Po = D + (E – D) r/k
k
where,
Po = Expected Market Price as per Walter Model
D = Dividend per share
E = Earnings per share
R = Rate of return (Average Growth Rate )
K = Cost of Capital (Interest Rate on Bank Loans )
4) Gordon Model
Po = d0 (1 + g)
K–g
Where,
Po = Expected Market Prices as per Gordon Model
D0 = Dividend per share
G = Growth Rate (Average Dividends)
K = Cost of capital (Interest Rate on Bank Loans)
5). Traditional Model
Po = m ( D + E / 3)
Where,
Po = Expected Market Price according to Traditional Model
M = multiplier
D = Dividend per share
E = Earning per share
3. Collection of Data
There are two main sources of data collection:

Primary source

Secondary source
1.5
LIMITATIONS OF THE STUDY
The study has several limitations.
Firstly, the sample is small as only four cement companies are selected for analysis
and interpretation of data.
Secondly, I had not the fullest exposure to the various research methodologies
available and hence the available handy methodology was chosen.
Thirdly, the analysis is conduced in terms of only a few models and the conclusions
arrived at were evaluated wit the data collected from various sources. As a result there
are certain discrepancies in the predictions of the models and the actual data collected.
I would like to pursue the subject later for the in depth study.
THEORITICAL ASPECTS
2.1
WHAT IS DIVIDEND
If you have ever owned stock – and most of us have, in the present economic boom –
you are probably familiar with the basic concept of a dividend. Companies pay
dividend on their stocks as a means of sharing profits with shareholders. Without
dividends, the only way to receive income from the stock is to sell them at a profit.
Dividends are payments made to stockholders from a firm’s earnings, whether those
earnings were in the current period or in previous periods.
The factors that companies may consider before declaring dividends includes: future
expansion plans and capital requirements, profit earned during the financial year,
overall financial condition as well as cost of raising funds from alternative sources,
liquidity, applicable taxes (including tax on dividend), exemptions under tax laws
available to various categories of investors from time, and money market conditions.
A major decision of financial management is the dividend decision in the sense that
the firm has to choose between distributing the profits to the shareholders and
ploughing them back into the business.
The Dividend decision, in corporate finance, is a decision made by the directors of a
company. It relates to the amount and timing of any cash payments made to the
company’s stockholders. The decision is an important one for the firm as it may
influence its capital structure and stock prices. In addition, the decision may
determine the amount of taxation that stockholders pay.
Ex-Dividend: The date on or after which a security is traded without a previously
declared dividend or distribution. After the ex-date, a stock is said to trade exdividend.
Interim Dividend : A dividend payment made before a company’s AGM and final
financial statements. This declared dividend usually accompanies the company’s
interim financial statements.
Final Dividend : The final dividend is declared at a company’s Annual General
Meeting (AGM) for any given year. This amount is calculated after statements are
recorded and the directors are aware of the company’s profitability and financial
health.
IMPORTANT DATES TO REMEMBER FOR DIVIDEND
Declaration Date : The declaration date is the day the Board of Director’s announces
their intention to pay a dividend. On this day, the company creates a liability on its
books. It now owes the money to the stockholders. On the declaration date, the Board
will also announce a date of record and a payment date.
Date of record: Shareholders who properly register their ownership on or before this
date will receive the dividend. Shareholders who are not registered as of this date will
not receive the dividend. Registration in most countries is essentially automatic for
shares purchased before the ex-dividend date.
Ex-dividend date: Is set by the exchange where the stock is traded, several days
(Usually two) before the date of record, so that all trades made on previous dates can
be properly settled and the shareholder list on the date of record will accurately reflect
the current owners. Purchasers buying before the ex-dividend date will receive the
dividend. The stock is said to trade cum dividend on these dates. The stock trades exdividend on these dates.
Payment Date: The date when the dividend checks will actually be mailed to the
shareholders of a company.
2.2 DIVIDEND PAYOUT AND RETAINED EARNING
Dividend is paid out of the funds available with the firm. An important aspect of
dividend policy is to determine the amount of earnings to be distributed to
shareholders in the form of dividend and the amount to be retained for future growth.
Retained earnings are a significant internal source of financing the growth of the firm.
There is an inverse relationship between retained earnings and cash dividends. Larger
the retention, lesser the dividends. Smaller the retention, larger the dividends.
The major decision of financial management is regarding the dividend decision. The
firm has to choose between distributing the profits among the shareholders and
ploughing them back into the business. The effect of the decision will be on
shareholders wealth. The firm should consider which alternative is consistent with the
goal of wealth maximization of the shareholders.
Whether dividends are paid out or earnings are retained, will depend upon the
availability investment opportunities to the firm. If a firm has sufficient investment
opportunities, it will retain the earnings to finance them and if acceptable investment
opportunities are not adequate, the earning would be distributed to the shareholders.
The investment opportunities are related to return on investment.
The relationship between the return on the investment ( r ) and the cost of capital (k )
will influence investment opportunities. If r exceeds k, a firm has acceptable
investment opportunities, so firm will retain the earnings to finance the project. If
retained were more than requirements, the excess earnings would be distributed to the
shareholders in the form of cash dividends. Thus, the amount of dividend will
fluctuate from year to year depending upon the investment opportunities.
With abundant opportunities, the dividend payout ratio (D/P ratio, i.e. the ratio of the
dividends to net earnings) would be zero. When there are no profitable opportunities,
the D/P ratio will be 100. So long as the firm is able to earn more than the cost of
capital (ke) the investors would be satisfied with the firm retaining the earnings. In
contrast, if the return were less than the ke, the investors would prefer to receive
earnings in the form of dividends.
2.3
1.
FORMS OF DIVIDEND
Cash Dividend
Cash dividends are those paid out in form of “real cash”. It is a form of investment
income or investment interest and is taxable in the year it is paid. It is the most
common method of sharing corporate profits.
Reasons why companies avoid paying cash dividends:
Companies have often avoided paying cash dividends for two reasons:
1) Management and the board may believe that the money is best re-invest into
the company for the purpose of research and development, capital investment,
expansions, etc.
2) At times when dividend are paid, shareholders suffer from “double taxation”
of those dividends i.e. firstly the company pays income tax to the government
when it earns any income, and then when the dividend is paid, the individual
shareholder pays income tax on the dividend payment.
Both the above situations are often used as justification retaining earnings, or for
performing a stock buyback.
If we take a look globally, Microsoft is an example of a company that has historically
been a proponent of retaining earnings. It did so right its IPO in 1986 until the year
2003, when it declared it would start paying dividends. By this point Microsoft had
accumulated over US$ 43 billion in cash. And there had been increasing irritation
from stockholders who believed this large pile of cash should lie in their hands and
not in the company’s originally, the official reason to amass this large sum was to
create a reserve for Microsoft’s legal battles: Since then, Microsoft appears to have
changed tactics such that the reserve is not as necessary.
2..
Stock dividends or Scrip dividends:

Stock dividends are those paid out in the forms of additional stock shares of
the issuing corporation, or other corporation ( for example, its subsidiary
corporation )

They are usually in proportion to shares owned. For instance, for every 100
shares of stock owned, 5% stock dividend will yield 5 extra shares. This is
very similar to a stock split in that it increases the total number of shares
while lowering the price of each share and does not change the market
capitalization.
A practical example of stock dividends.
Suppose Reliance Industries Ltd has 1,00,000 shares. The company has five investors
who each own 20,000 shares. The stock currently trades at Rs. 100 per share, giving
the business a market capitalization of Rs. 1 crore.
Management now decided to issue a 20% stock dividend. It prints up an additional
2000 shares of the stock (20% of 1 lac) and sends these to the shareholders based on
their current ownership. All of the investors own 20,000 or 1/5 of the company, so
they receive 4000 of the new shares (1/5 of the 20000 new shares issued )
Now, the company has 1,20,000 shares outstanding and each investor owns 24000
shares of the stock. The 20% dilution in value of each share, however, results in the
stock price falling to rs. 83.33. here’s the important part: the company and the
investors are still in the exact same position. Instead of owning 20,000 shares at Rs.
100, the now own 24,000 shares at Rs. 83.33. The company’s market capitalization is
still Rs. 1 crore.
3. Property dividends or dividends in kind:

Property dividends are those paid out in form of assets from the issuing
corporation, or other corporation (e.g. its subsidiary corporation )

This form of dividend is rarely paid, but whenever they are paid, they are paid
in the form of products or services provided by the corporation.
2.4 DIVIDEND POLICY AND ITS DIFFERENT TYPES
In simple terms dividend policy can be termed as a “Win-Win” policy
Dividend policy of a firm has implications for investors, lenders as well as other
stockholders. For investors, dividends – whether declared today’s or accumulated and
provided at a later date – are not only a means of regular income, but also dependent
on the amount of dividend that they can offer to shareholder because more dividends
may also have interest in the amount of dividend a firm declares because, more
dividend paid would result into less amount available for servicing and redemption of
their claims.
A firm can choose from three different dividends policies :
A. Constant Dividend per share
B. Constant payout ratio
C. Constant dividend per share plus extra dividend
A).
Constant Dividend per share.
In case of constant dividend per share, a company follows a policy of paying a certain
fixed amount per share as dividend. For instance, on a share of face value of rs. 100 a
firm may pay a fixed amount of Rs. 15 as dividend. This amount would be paid year,
irrespective of the level of earnings of the firm. In fact, when a company follows such
a dividend policy, it will pay dividends to the shareholders ever when it suffers losses.
From the table it can be observed that while the earnings may fluctuate from year to
year, the DPS remains constant. To be able to pursue such a policy a firm whose
earnings are not stable would have to make provisions in years when earnings are
higher for payment of dividend in lean years. Such firms usually create a reserve for
dividends equalization. The balance standing in this fund is normally invested in such
assets as can be readily converted into cash.
B) Constant Pay Out Ratio
When a company applies constant payout ratio, it pays a constant percentage of net
earnings as dividends to the shareholders. In other words, constant dividend payout
ratio implies that percentage of earnings paid out each year is fixed. Accordingly,
when the earnings of a firm decline substantially or there is a loss in the given period,
the dividends would also be lower.
C) Constant dividend per share plus extra dividends:
Under this policy, a firm usually pays a fixed dividend to the shareholders and in
years of marked propensity, additional or extra dividend is paid over and above the
regular dividend. As soon as normal conditions return, the firm cuts the extra dividend
and pays the normal dividend per share.
Dividend Payout (D/P) Ratio :
The percentage of net income that is paid out in the form of dividend is known as the
dividend payout ratio. A dividend policy involves the decision of either to pay out the
earning in form of dividend or retain it in the business. The payment of dividend
results in the reduction of cash and is therefore a depletion of the total asset. Thus,
dividend imply outflow of cash and lower future growth. The optimum dividend
policy should strike a balance between current dividends and future growth of
company because its inverse, the retention ratio is important in projecting the growth
of company because its inverse, the retention ratio ( the amount not paid out to
shareholders in the form of dividends ), can help project a company’s growth.
Calculating Dividend Payout Ratio:
Suppose the cash flow statement of Reliance Industries Ltd shows that the company
paid Rs 1 crore in dividends to shareholders, in the year 2004. The income statement
for the same year shows the business had reported a net income of Rs. 3 crore. To
calculate the dividend payout ratio, the investor would do the following:
Rs. 1 crore dividend paid
---------- (divided by ) ----------------Rs 3 crore reported net income
The answer, 33.33% tells the investors that Reliance Industries Ltd. Paid out nearly
thirty – four percent of its profit to shareholders over the course of the year.
2.5 CONSIDERATIONS IN DIVIDEND POLICY
Dividend policy is affected by various owner and capital Market considerations.
Owner’s considerations :
1) Tax Status of the shareholders:
If a firm has a large percentage of owners who are in the high tax brackets, its
dividend policy should seek to have higher retentions. Such a policy will provided its
owners with income in the form of capital gains as against the individuals in a high
tax bracket. On the other hand, if a firm has a majority of low income shareholders
who are in a lower tax bracket they would probably favor a higher payout of the
earnings because of the need for current income and the greater certainty associated
with receiving the dividend now, instead of less certain capital gains later.
2) Opportunities:
The firm should not retain funds if the rate of return earned by it would be less than
one, which could have been earned by the investors themselves from external
investments of funds. Such a policy would obviously be detrimental to the interests of
shareholders. It is difficult to ascertain the alternative investment opportunities of
each of its shareholders and therefore the alternative investment opportunity rate.
Therefore, in formulating dividend policy the evaluation of the external investment
opportunities of owners is very important.
3) Dilution of Ownership
The financial manager should recognize that a high dividend payout ratio may result
in the dilution of both control and earnings for the existing equity holders. Dilution in
earnings results because low retentions may necessitate the issue of new equity shares
in the future, causing an increase in the number of equity shares outstanding and
ultimately lowering earnings per share and their price in the market.
Capital Market Considerations:
In case a firm has easy access to the capital market, either because it is financially
strong or large in size, it can follow a liberal dividend policy. However if the firm has
only limited access to capital markets, it is likely to adopt low dividend payout ratios.
Such firms are likely to rely more heavily on retained earnings as a source of
financing their investments.
Firms which lean heavily on financial institutions from procuring funds, declare a
minimum dividend so that they can remain on the eligible list of these institutions. It
is because in general most financial institutions are prohibited from buying shares in
companies, which pay no dividends a company should be paying dividends at a
certain minimum rate for at least some specified number of year. Since such
institutions are significant buyers of corporate securities some firms that would
otherwise have not paid any amount of dividend, would pay some dividend so that
remain in the eligibility list.
2.6
LEGAL, CONTRACTUAL AND INTERNAL CONSTRAINTS
AND RESTRICTIONS:
Legal requirements pertain to capital impairment, net profits and insolvency. In case
of the capital impairment rules there is a limit to the amount of cash dividend that a
firm can pay. A firm cannot pay dividends out of its paid up capital, otherwise there
would be a reduction in the capital which would adversely affect the security of its
lenders. In case of net profits, there is a restriction to the dividend to be paid out of the
firm’s current profits plus past accumulated retained earnings. Alternately, a firm
cannot pay cash dividend greater than the amount of current profits plus the
accumulated balance of retained earnings. In case of solvency, a firm is said to be
insolvent in two cases: first, when its liabilities exceed the assents and second, when it
is unable to pay its bills. It the firm is currently insolvent in either case, it is prohibited
from paying dividends. Similarly, a firm would not pay dividend if such a payment
leads to insolvency of other type. The rule is to protect the creditors by prohibiting the
liquidation of near bankrupt firms through cash dividend payments to the equity
owners.
Under contractual requirements, important restrictions on the payment of dividend
may be accepted by a company when obtaining external capital either by a loan
agreement a debenture, a preference share agreement or a least contract.
Internal constraints would include liquid assets, growth prospects, and financial
requirements, availability of funds, earnings stability and control.
In case of liquid assets once the payments of dividend is permissible on legal and
contractual grounds, the next step is to ascertain whether the firm has sufficient cash
funds to pay cash dividends. It may well be possible that the firm’s earnings are
substantial but the firm may be short of funds.
2.7 DIVIDEND MODELS
There are four models regarding dividend’s impact on share prices. They are as
follows:
1. Traditional Model
2. Walter Model
3. Gordon Model
4. Modigliani & Miller Model
1) Traditional Model :
The traditional position expounded eloquently by Graham and Dodd holds that the
stock market places Considerably more weight on dividends than on retained
earnings.
According to them :
“……the considered and continuous verdict of the stock market is overwhelmingly in
favor of liberal Dividends as against niggardly ones. The common stock investor must
take this judgment into account in the valuation of stock for purchase. It is now
becoming standard practice to evaluate common stock by applying one multiplier to
that portion of earnings paid out in dividends and a much smaller multiplier to the
undistributed balance. “
Their view is expressed quantitatively in the following valuation model advances by
them :
P = m (D + E / 3)
Where,
P = Market price per share
D = dividend per share
E = earnings per share
M = multiplier
According to this model, in the valuation of shares the weight attached to dividends is
equal to four times the weight attached to retained earnings. This is clear from the
following version of e.q. (21.4) in which E is replaced by (D + R)
P = m (D + D + R / 3)
The weight provided by Graham and Dodd are based on their subjective judgment and
not derived from objective, empirical analysis. Notwithstanding the subjectivity of
these weights, the major contention of the traditional position is that a liberal payout
policy has a favorable impact on stock price.
Empirical Evidence
Advocates of the traditional position cite the results of cross-section regression
analyses like the following
Price = a + b Dividend + c Retained Earnings
Typically, in such a regression analysis the dividend coefficient, b, is much higher
than the retained earnings coefficient, c. so the advocates of traditional position claim
that their hypothesis is empirically vindicated. However, a careful look at the above
regression suggests that the conclusion reached by the traditionalists is unjustified for
the following reasons:
1. Equation (21.6) is misspecified because, inter alia, it omits risk which is an
important determinant of price. A better specified regression equation is :
Price = a + b dividend + c Retained Earnings + d Risk
In this equation b and c are expected to be positive whereas d is expected to be
negative. Because risk and dividend are inversely correlated the higher the level of
risk the smaller the dividend and vice versa-the dividend variable in Eq. (21.6) will
capture the effect of risk as well. Thus the omissions of risk will impart an upward
bias to b, the coefficient of dividend.
2. Measurement error distorts the results. It is well known that the measurement of
earnings almost invariably subject to error. The dividend figure, however, is given
precisely. So the measurement error in earnings is fully transmitted to retained
earnings which are simply earnings minus dividends.
To sum up, omission of risk imparts an upward bias to b, the coefficient of dividend
are measurement error characterizing retained earnings imparts a down-ward bias to c,
the coefficient of retained earnings. Hence the claim of traditionalists that b > c
implies that a high payout ratio increases stock value cannot be vindicated.
2) Walter Model :
James Walter has proposed a model of share valuation which supports the view that
the dividend policy of the firm has a bearing on share valuation. His model is based
on the following assumptions:
The firm is an all-equity financed entity. Further, it will rely only on retained
earnings finance its future investments. This means that the investment decision is
dependent on the dividend decision. The rate of return on investment is constant. The
firm has an infinite life.
Valuation Formula : Based on the above assumption, Walter put forward the
following valuation formula :
P = D + E – D) r / k
K
Where,
P = price per equity share
D = dividend per share
E = earnings per share
R = internal rate of return of investments
K = cost of capital
The first component is the present value of an infinite stream of dividends: the second
component the present value of an infinite stream of returns from retained earnings.
Thus, as per Walter Model :
A) When the rate of return is greater than the cost of capital (r > k), the price per
share increase as the dividend payout ratio decreases.
B) When the rate of return is equal to the cost of capital ( r = k ), the price per
share does not va with changes in dividend payout ratio.
C) When the rate of return is lesser than the cost of capital (r < k), the price per
share increase and the dividend payout ratio increases.
Thus, Walter Model implies that:
A) The optimal payout ratio for a growth firm (r > k) is nil.
B) The optimal payout ratio for a normal firm ( r = k) is irrelevant.
C) The optimal payout ratio for a declining firm ( r< k ) is 100 percent.
3) Gordon Model :
Myron Gordon proposed a model of stock valuation using the dividend capitalization
approach. Here model is based on the following assumptions:
A) Retained earnings represent the only source of financing for the firm.
B) The rate of return on the firm’s investment is constant.
C) The growth rate of the firm is the product of it’s retention ratio and it’s rate of
return
D) The cost of capital for the firm remains constant and it is greater than the
growth rate.
E) The firm has a perpetual life.
F) Tax does not exist.
Valuation Formula :
P 0 = E1 ( 1 – b)
K – br
Where,
P0 = price per share at the end of year 0,
E1 = earnings per share at the end of year 1,
(1 – b ) = fraction of earnings the firm distributed by way of dividends,
B = fraction of earnings the firm retains,
K = the rate of return required by the shareholders.
R = rate of return earned on investments made by the firm
Br = the growth rate of earnings and dividends.
Implications:
1. When the rate of return is greater than the cost of capital (r > k) the
price per share increases as the dividend payout ratio decreases.
2. When the rate of return is equal to the cost of capital ( r = k), the price
per share does not vary with changes in dividend payout ratio.
3. When the rate of return is lesser than the cost of capital ( r < k), the
price per share increases as the dividend payout ratio increases.
Thus, Walter Model implies that:
A) The optimal payout ratio for a growth firm (r > k) is nil
B) The optimal payout ration for a normal firm ( r = k ) is irrelevant.
C) The optimal payout ratio for a declining firm ( r < k) is 100 percent.
4) Modigliani & Miller Model :
Modigliani & Miller have advanced the view that the value of a firm depends solely
on it’s earnings power and is not influenced by the manner in which it’s earnings are
split between dividends are retained earnings.
Assumptions :
A. Capital markets are perfect and investors are rational; information is freely
available, transactions are instantaneous and costless, securities are divisible
and no investor can influence market price.
B. Floatation costs are nil.
C. There are no taxes.
D. Investment opportunities and future profits of firms are known with certain.
The substance of MM argument may be stated as follow:
If a company retains earnings instead of giving out as dividends, the shareholder
enjoys capital appreciation equal to the amount of earnings retained.
If it distributes earnings by way of dividends instead of retained it, the shareholder
enjoys dividend equal in value to the amount by which his capital would have
appreciated had the company chose to retain its earnings.
Hence the division of earnings between dividends and retained earnings is
irrelevant from the poi of view of shareholders.
P=[D+P]/[1+k]
Where,
P = market price per share at time 0
D = dividend per share at time 1
P = market price per share at time 1
K = discount rate applicable to the risk class to which the firm belongs
2.8
LEGAL AND PROCEDURAL ASPECT
Legal Aspects
The important provisions of company law pertaining to dividends are described
below:
1). Companies can pay only cash dividends (with the exception of the bonus share)
2). Dividends can be paid only out of the profits earned during the financial year after
providing for depreciation and after transferring to reserves such percentages of
profits are prescribed by law.
3). Due to inadequacy or absence of profits in any year, dividend may be paid out of
the accumulated profits of previous year.
4). Dividends cannot be declared for past yeas for which the account has been closed.
Procedural Aspects.
The important events and dates in the dividends payment procedure are:
1) Board Resolution:
The dividend decision is the prerogative of the board of the Directors. Hence, BOD
should in formal meeting resolve to pay the dividend.
2) Shareholder Approval:
The resolution of the BOD to pay the dividend has to be approved by the shareholders
in the annual General Meeting.
3) Record Date
The dividend is payable to shareholder whose name appear in the Register of
Members as on the record date.
4) Dividend Payment:
Once the dividend declaration has been made, dividend warrants must be posted
within 42 day. Within a period of 7 days after the expiry of 42 days. Unpaid dividend
must be transfer to a special account opened with a scheduled bank.
2.9 FACTORS AFFECTING SHARE PRICES
The factors that affect the market price of share are discussed under:
1. Demand and Supply
The forces of demand and supply have a direct bearing on the prices of various
securities on the stock exchange. When the demand for the particular security exceeds
its supply, its prices tend to rise. But when the supply is more than the demand, the
prices of the securities is likely to fall.
2. Market Trend and Speculative Preferences
Different trends come and go in the share market. Speculators generally make trends.
Like now day InfoTech Companies shares prices are rising and it is trend now. The
activities of speculator often lead to wide fluctuations insecurity prices.
3. Political Developments
Political event has a quick impact on stock exchange operations. A change in
government and outbreak of civil war, an announcement of a general election and
such other disturbances in the country may bring about fluctuations in the prices of
securities.
4. Rumors
Sometimes to bring liveliness brokers or speculators start spreading rumors.
Sometimes there are rumors that some very important personality of a company or of
a government had died.
5. Financial Position of the Company
When the financial results of a company are good in a particular year the demand for
its securities goes up. It is vice versa when financial position is bad. Dividend paid on
security depends upon the financial position.
6. Management of the Company
Changes in the board of directors or Chief Executive of the Company also influence
prices of it securities. When a very prominent person joins as a director of a company
the faith of investors the company increases, and the prices of its shares tends to rise.
On the other hand, when a high reputed director resigns or retires from Board of
Directors of a company, it will have an adverse effect on its share prices.
7. Activities of Financial Institution
Operations of financial institutions including the foreign institutions have a significant
impact on the securities, when these institutions buy or sell a particular security in
large numbers, the prices security goes up or down.
8. Government policy
Changes in taxation and other economic policies of the Government have an
important bearing of the prices of securities. For instance increase or decrease in
excise duty on a product is likely bring down or push up the prices of shares of
concerned company.
9. Miscellaneous Factors
Stock exchange is such a sensitive barometer that it responses to various types of
factors. Change in weather, industrial combinations, trade cycles, budget, and changes
in bank rates may have considerable influence on the market prices of various
securities.
ANALYTICAL STUDY
OF
SELECTED COMPANIES
3.1 Company History – Shipping Corporation of India
The company was incorporated at Mumbai in 1961. The company was formed on 2nd
October 1961 when by virtue of the Shipping Corporation Amalgamation Order,
1961, the Undertaking of the Western Shipping Corporation Ltd., was merged into the
eastern Shipping Corporation Ltd., which was renamed “The Shipping Corporation of
India Ltd..” the corporation is an autonomous body working under the administrative
superintendent of the Govt. of India in the Ministry of Transport and
Communications.
The company’s object is Corporation operates cargo passenger cum-cargo and tanker
services.
1962
The entire capital is held by the Govt. of India.
1971
4,49,844 shares issued to Govt. against acquisition of shares of Jayanti shipping Co.
Ltd.
1972
100 shares issued to Govt. without payment in cash.
1993
The Russian Federation was expected to designate Port of Novorossisk for handling
Indo-Russian Cargoes. The Rupee-Rouble inter-se settlement reached advances stage
and was expected to give an impetus to revival of Indo-Russian trade. Equity shares
subdivided. 17689540 shares issued for consideration. Other than cash 2366,63,430
No. of equity shares issued to Govt. of India.
1994
During October, the Govt. further disinvested 38,64,600 shares representing 1.37% of
paid up capital of the company. Earlier, 5,22,45,900 shares i.e. 18.51% and with this
disinvestment, Govt. holding in the Company was reduced to 80.12%. The remaining
19.88% is held by Financial Institutions, banks, Mutual Funds, FIIS.
1997
Shipping Corporation of India Ltd, has signed a MOU with the Union surface
transport ministry for the next financial year 1997-98.
1998
SCI and OCC had signed a Memorandum of Understanding (MOU) recently as a
precursor to renew the contract for the transportation of crude.
2000
The state-owned Shipping Corporation of India is considering a proposal by
Consultancy major PricewaterhouseCoopers (PWC) to hive off its three divisions bulk
carrier and tanker, passenger and liner and technical offshore services into three
separate companies.
The company will consider the restructuring of SCI by way of a three-way split as
recommended by PricewaterhouseCooper (PWC), enabling it to derive a better
valuation than it currently does.
The government currently holds 80% in SCIL. About 18% is spread among financial
institutions and mutual funds. Floating stock in the company is a miniscule one %.
The plans for disinvestment.
2002
Government decides on strategic sale of 51% of SCI’s equity and has fixed Rs. 800 cr
of net worth criterion to SCI.
SCI paid all its debt of Rs. 255cr to government before its disinvestment.
SCI records 82% dip in the net profit.
2003
SCI declared interim dividend of 30% for the financial year 03.
Cabinet committee on disinvestment decides to invite fresh expression of interest
(EOL) for disinvestment of 51%.
The disinvestment of Shipping Corporation of India (SCI) has been postponed
indefinitely though the government continues to be firm on its divestment policies.
2007.
SCI is now certified as ISO 9001-2000 compliant by Indian Register of Quality
Services (IRQS) from 08.05.2007
2008.
The Government of India, conferred “Navratna” status to SCI on 01.08.2008, leading
to further enhanced autonomy and delegation of powers to the Company towards
capital expenditure, formation of Joint Ventures, mergers, etc.
SHIPPING CORPORATION OF INDIA:
CORELATION BETWEEN MARKET PRICE AND DEVIDEND PER SHARE
YEARS
X (MARKET
Y (DPS)
(x-x-)
(y-y-)
(x-x-)2
(y-y-
(x-x-)(y-y-)
)2
PRICE )
2005
60
17
-40
8
1600
64
-320
2006
93
4
-7
-5
49
25
35
2007
107
11
7
2
49
4
14
2008
115
0
15
0
225
0
0
2009
125
13
25
4
625
16
100
500
45
0
9
2548
109
-171
R= -0.35
As per our calculations, the correlation between Market value and dividend per share
for the last 5 year is negative. But our observation says that market value of shares
increasing in the last 5 years which indicates, company is a growth firm. And thus
Walter Model applies.
3.2
Company History Oil and Natural Gas Corporation
Oil and Natural Gas Corporation (ONGC) was set up in 1956 with significant
contribution in industrial and economic growth of the country.
1959
In October the Commission was converted into a statutory body by the Oil and
Natural Gas Commission Act, 1959. The main objectives of the Commission were to
plan, promote, organize and implement programs for the development of oil and
natural gas resources and the production and sale of oil and natural gas products.
ONGC functions as the primary arm of the Government as regards exploration for and
exploitation of India’s petroleum resources.
The Company’s revenues are derived primarily from the sale of its production of
crude oil, natural gas, liquefied petroleum gas (LPG), C2-C3 (ethane-propane) and
natural gasoline (NGL).
To strengthen reserves accretion portfolio and open up areas of future exploration.
ONGC has undertaken an accelerated Program of Exploration with an outlay of Rs.
3958 crores.
1993
Oil and Natural Gas Corporation Limited (ONGC) was incorporated by the
Government of India as a public Limited Company under the Companies Act 1956 on
23rd June. The company is engaged in the exploration, development and exploitation
of hydrocarbons i.e. Crude oil and natural gas.
The company was subsequently converted into a public limited company in June-93
following new liberalized economic policy adopted by the Government of India in
July. 1991 sought to deregulate and delicense the core sector (including petroleum
sector) with partial disinvestment of Govt. equity in Public sector undertakings and
other measures.
1994
The company acquired the undertaking, business, assents and liabilities of the
erstwhile Oil and Natural Gas Commission (the Commission) on 1st February.
1996
The company embarked upon exploration in the deep sea basing on the east and west
coast of the country
ONGC Videsh Ltd is a wholly owned subsidiary of the company.
3428,53,716 shares issued to the President of India. 1076,440,366 No. of equity
shares issued as bonus shares. 66,39,910 No. of equity shears disinsted.
1997
The venture with a private foreign company would be set up with an equity
participation of 50 percent each.
ONGC Ltd and PGS Ocean Bottom Seismic, a Norwegian company, have signed a Rs
180 crore contract for a three-dimensional ocean bottom cable technique seismic
survey over the Mumbai High field.
1998
Oil and Natural Gas Corporation (ONGC) is holding negotiations with Arco, an
American Company for setting up a 50:50 joint venture for coal bed methane (CBM)
exploration projects.
2000
Oil and Natural Gas Corporation and Oil India Ltd have signed their annual
memorandum of understanding (MOUs) with the government for performance targets
for 2000-01.
2001
Oil & Natural Gas Corporation Videsh Ltd., the overseas subsidiary of ONGC will
sign a 1.7 billion dollar deal with Russian national oil company Rosneft for taking 20
per cent stake in Russian Far East oil and gas field Sakhalin-I, in Mosocow on
February 10.
As part of its mega restructuring exercise, the Oil and Natural Gas Corporation has
introduced a voluntary retirement scheme for trimming its 40,000 strong work force
all over the country.
2002
The board of directors of Oil and Natural Gas Corporation (ONGC) has approved the
acquisition of the Aditya Birla group’s stake in the joint venture Mangalore Refinery
and Petrochemicals Ltd (MRPL)
Retains top most profit making Public Sector Company (PSU) status.
ONGC strikes deal with refiners to sell crude at international prices
ONGC ranked no. 1 among ET 500
2003
Ties up with IOC for supply of crude oil
Acquires 37.38% equity stake in Mangalore Refinery & Petrochemicals Ltd (MRPL)
ONGC Videsh Ltd. (OVL) purchases 25% stake of Canadian Talisman Energy in
Sudan oilfield for 1 million.
Retains top sport in market can in ET 500
Company ranked in FT Global 500 list
Enters into an MOU with Bharat Petroleum Corporation Ltd (BPCL) for supply of
crude oil for a period of two years from April 01, 2002 to March 31, 2004.
Hikes stake in Mangalore Refinery & Petrochemicals Ltd (MRPL) to 71.49% from
51.25%
Ends its two-year training and consultancy services joint venture with oil refining
giant India Oil Corporation.
ONGC – Disinvestment of 10% Equity by Government of India.
2004
Market capitalizations crosses Rs. 100000 cr
The board has approved a proposal to invest Rs 900 cr in a five – million – tonne C2C3 extraction plan.
Finance Minister allows ONGC to buy Mangalore Refinery and Petrochemicals stake.
ONGC decides to offer 32 marginal fields to private operators Govt. of India divests
10% stake in the company by selling 14.26 cr shares at a cut-off price of Rs. 750 per
share.
Awards Rs 160 cr three year order to supply oil exploration equipment for BHEL
The government on March 23 issued Rs 348.6 crore worth of fresh oil bonds to public
sector oil companies ONGC and OIL. The bonds carry a coupon rate of 5% for a five
year tenor.
Oil and Natural Gas Corporation (ONGC) has tied up with the Indian Institutes of
Foreign Trade (IIFT) for launching a special MBA course in international business for
its middle-level executives.
2006
ONGC internal audit bags ISO 9001 rating.
2007.
A Fortune-Global 500 Company, it is not only the largest E&P Company in India but
also one of the most valuable companies in India. Platts recognized it as No. 2 E&P
Company in the World and 23rd among leading global Energy majors in its ‘Platts Top
250’ Global Energy Company Ranking 2007
ONGC :
CORELATION BETWEEN MARKET PRICE AND DEVIDEND PER SHARE
YEARS
X (MARKET
Y (DPS)
(x-x-)
(y-y-)
(x-x-)2
(y-y-
(x-x-)(y-y-)
)2
PRICE )
2005
395
27
-302
-7
91204
49
2114
2006
566
30
-131
-4
17161
16
524
2007
723
45
216
11
676
121
286
2008
871
38
174
4
30276
16
686
2009
930
30
233
-4
54289
16
-932
3485
170
193606
218
2688
R = 0.41
As per our calculation, the correlation between Market value and dividend per share
for the last year is positive and it is less than 0.50. But my observation says that
market value of share is increasing in last 5 year which indicated company is a growth
firm.
3.3
Company History – Infosys Technologies
1981
On July 2nd the company was incorporated as Infosys Consultants Private Limited at
Mumbai.
INFOSYS was promoted by software professionals, Mr. S Gopalkrishnan, Mr. K
Dinesh, Nandan M Nilekani, Mr. S.D. Shibulal, Mr. N.R. Narayana Murthy & Mr.
N.S Raghvan.
The company is engaged in software development in the form of services, turnkey
projects and products for the domestic and export market. The software development
is targeted towards the distribution, banking telecommunication and manufacturing
sectors worldwide.
1992
On April 21st the name changed in Infosys Technologies Private Limited and the
registered office was moved to Bangalore.
On June 2nd the company was converted into a Public Limited Company under the
name Infosys Technologies Ltd.
1993
The company turned up with ISO 900 certification.
19,76,100 No. of equity shares of Rs. 10 each issued, subscribed and paid-up
(15,84,000 shares to directors, promoters, 2,68,100 shares to employees of the
company and 1,24,000 shares at a prem. of Rs 70 per to shareholders on right basis.)
68,600 shares reserves for allotment in preferential basis to employees of the
company and group company (only 10, 3000 shares taken up). Balance 3,07,200
shares along with 58,500 shares not taken up by employees were issued to the public
(all were taken up)
During the period company undertook to expand its activities by setting up a software
technology park on 100% EOU. For this purpose Co. acquired 5 acres of land at
Electronic city near Bangalore.
To part finance the company’s project for setting up a software Technology Park,
company made a public issue of 13,76,000 equity shares of Rs. 10 each at a premium
of Rs. 85 per share in February.
1994
During the year marketing offices were opened in San Francisco, Cincinnati, New
York and Dallas. During the year company proposed to make a preferential issue of
7,50,000 warrants convertible into shares to the Infosys Technologies Ltd. Employees
Trust to form the basis of employee stock offer plan.
33,52,100 no bonus equity shares issued in proportion 1:1
5,50,000 no. of equity shares of Rs 10 each allotted at a premium of Rs 440 per share
to FIIS, mutual Funds and other on preferential basis. Of these some shares were
forfeited.
1995
During the year the company established Yantra Corporation, a wholly owned
subsidiary in USA investing US $ 5,00,000 in the equity of the said subsidiary.
1997
The Institute of Chartered Accountants of India awarded the Silver Shield for the Best
Presented Accounts, amongst the entries received from the non-financial, private
sector companies for the year 1995.
The readers of the well-known Asia Money magazine have voted the company as
India’s best-managed Company for the year 1996
Company also won several awards for export performance.
In December, the Company announced its plans for an ADR issue up to US $ 75
million.
The world economic forum selected Infosys as one of India’s most remarkable and
rapidly growing entrepreneurial companies in November.
8008,600 bonus shares issued in propr, 1:1, 1,34,500 No. of equity shares at a prem.
of Rs 90 per share allotted on conversion of warrants. 14,500 forfeited shares issued.
1998
During the year, the issued, subscribed and paid-up capital increased by Rs.
8,75,76,000 consequent to the issued of 7,49,000 shares of Rs 10 each, fully paid, to
employees of the company and Employees Welfare Trust under the ESOP, and a
bonus issue of 80,08,600 shares in the ratio of 1:1 to the members as of the record
date. Of the total paid-up capital of Rs. 16,01,72,000 Rs 12,92,69,000 (81% of the
paid up capital) has been issued as bonus shares.
During the year the company received several AWARDS.
The readers of Asia Money Magazine once again voted Infosys the best in strategy
and Management from among the listed companies in India, and among the best in
Asia, for the year 1996-97.
The Bangalore Stock Exchange rated the Company as the best Regional Company for
all-round quality management and as a company which gives top priority to
shareholder interests. The company is the first to receive this award.
The Economics Times Awards for Corporate Excellence was won by Bangalorebased software giant Infosys Technologies of the year.
1999
Alpha Data, a leading information services company in the UAE, has tied up with
Infosys Technologies to market and support banking software products from Infosys
in the UAE.
Infosys Technologies has taken the American Depositor Receipts (ADRs) route with
the US public offering of 1,800,000 ADRs at each. The ADRs will represent 9,00,000
equity shares and will go public on march 11. Infosys is the first every India register
company to be listed in the Nasdaq stock market in USA.
Infosys Technologies Ltd chairman N R Narayana Murthy has been awarded the first
ever Sir M Visvesvaraya Memorial Award, instituted by Federation of Karnataka
chambers of Commerce and industry (FKCCI) to coincide with 138th Birthday of Sir
M Visvesvaraya.
2000
The company proposes to increase its software professional strength to 2,400 from the
present 1,200.
The company has re-emerged as India’s second most valuable company, replacing the
FMCG heavyweight, HLL.
Infosys has signed an MOU with the Sharjah Airport International Free Zone
Authority to have a base there.
Goldman Sachs has rated Infosys Technologies and HCL Technologies as market out
performers and among the best quality names in the industry.
The company issued on September 30, 667 no. of equity shares pursuant to the
exercise of stock options by certain employees.
Nortel Networks is joining hands wit the company to set up a Wireless centre of
Excellence in Bangalore.
The company has allotted 460 no. of equity shares of par value of Rs 5 per share to
the Bankers Trust Company, New York.
The Company has allotted an aggregate 500 equity shares of Rs 5 each to individual
optioned pursuant to the exercise of the employees under the 1999 option plan, on
receipt of payment of the subscription monies in respect of the said shares aggregating
Rs. 20,32,525.
2001
Infosys Technologies has signed a MOU with the Andhra Pradesh Government for
establishing a software development campus at Hyderabad.
The Company is setting up its biggest software development centre in Bangalore.
The company has allotted 100 equity shares of par value of 5 per share to the Bankers
Trust Company, New York the depository to the company’s ADS issue as underlying
shares in respect of 200 ADR’s to be issued and allocated to the purchasers.
Infosys Technologies board has allocated 67,050 no. of equity shares at a par value of
Rs 5 par to employees of the company.
The Board of Directors allocated an aggregate of 41,050 stock options exercisable for
equity shares of par value Rs 5 per share to employees of the company, pursuant to
the company’s 1999 option plan.
The company has informed the BSE that the company has received a disclosure from
Emerging Markets Growth Fund Inc stating that they hold 34,03,880 No. of equity
shares representing 5,15 percent of the paid up capital of the company.
Infosys and TCS have emerged as the leading Indian software exporters during 200001 clocking exports worth Rs. 2,870.26 and Rs. 1,852.94 cr. Respectively.
2002
Receives Motilal Oswal Award for Wealth Creation for 1996-2001
Tops among IT exporters with exports of Rs 1900 cr in the period April-December
2001 Airbus Industries hires Infosys for wing Design.
Records 35 per cent increase in the value of its brand to Rs. 7,257 cr as of Mrach 31,
2002
Infosys Tech bags prestigious Corporate University Exchange Excellence Award for
2002
NASDAQ selects Infosys as the best value reporter
RBI permits 100% FII purchase in Infosys.
Ties up with IB for knowledge sharing arrangement
N R Narayana Murthy receives the Ernst & Young Entrepreneur of –the year award
for 2002
Company declares that it has won Most Admired Knowledge Enterprise (MAKE)
award in the Asia region for 2002.
Progeon issues, 4,375.000 shares to Citicorp.
2003-2004
Fortune names Narayana Murthy, Nandan Nilekani as ‘Asia’s Businessmen’ of the
year 2003 making them the first Indians to win the award.
ICRA, the credit rating agency, gives CGR1 rating8 for the company’s corporate
governance practices, making it the first company in the country to get the highest
rating for corporate governance.
Launches ethics code to check financial frauds
Infosys brand valued at RS 7,488 cr
Wins Electronics & Computer Software Export Promotion Council (ESC) award for
computer software and services sector.
Business week ranks the company in the 74th place among the world’s top 100 best
performing InfoTech companies making it the only Indian company in the list.
Infosys Technologies has been allotted the highest governance and value creation
(GCV) rating of ‘CRISIL GCV Level 1.
Signs an agreement to acquire 100% equity of Expert information Services Pty Ltd,
Australia for A$ 31.0 million (US$22.9 million)
The Board of Directors at its meeting held on December 20, 2003 have allotted
22,439 equity shares of par value of Rs 5/- to the optionees, pursuant to the exercise
of the options granted to the employees under the company’s 1999 stock option plan.
2005-2008
FMR Corp. and its direct and indirect subsidiaries and Fidelity International Limited
(FIL) and its direct and indirect subsidiaries acquire 1,44,221 shares (0.22%). Their
shareholding after the said acquisition is 33,58,318 shares (5.05%),
Infosys completes five years on NASDAQ
Infosys becomes first Indian listed IT firm to net Rs. 1000 cr
Indian Merchants Chambers (IMC) has announced that Infosys
Technologies chairman NR Narayana Murthy is the winner of the IMC’s prestigious
Diamond Jubilee Award for ‘eminent businessman of the year’.
Comes out with a bonus issue in the ratio of 3:1.
CORELATION BETWEEN MARKET PRICE AND DEVIDEND PER SHARE
YEARS
X (MARKET
Y (DPS)
(x-x-)
(y-y-)
(x-x-)2
(y-y-
(x-x-)(y-y-)
)2
PRICE )
2005
564
29
-681
-15
463761
225
-10215
2006
883
120
-362
76
131044
5776
-27512
2007
1306
13
61
-31
3721
961
-1891
2008
1751
44
506
0
256036
0
0
2009
1721
14
476
-30
226576
900
-14280
6225
220
0
0
1081138 7862
R =r -0.58
-53898
As per our calculation, the correlation between Market value and dividend per share
for the last 5 years is negative. But my observation says that market value of share is
increasing in last 5 years which indicated company is a growth firm. And thus walter
model applies.
3.4
Company History Reliance Textile Industries Ltd
1973
On 8th May the company was incorporated in Karnataka state as a public limited
company under the name Mynylon Ltd. to manufacture synthetic blended yarns and
fabrics, polyester filament yarn, polyester glass shells and colour TV picture tubes.
1975
On 28th June this company was converted into a public limited company. On 11th
February 1966 a company by name of Reliance Textiles Industries Pvt. Ltd was
incorporated in Maharashtra. It established a synthetic fabrics mill in the same year at
Naroda in Gujarat.
On 1st July, Reliance Textile Industries Ltd. was amalgamated with Mynylon Ltd.
1977
With effect from 11th march 1st the name of Mynylon Ltd was changed to Reliance
Textiles Industries Ltd. The company manufactures synthetic blended yarns and
fabrics polyester filament yarn polyester staple fiber chemicals and allied products
color TV glass shells and color TV picture tubes. The Company’s yarns are marketed
under various brand names such as Texalit, Textron, Texlene, Poly dyed and
Polytwist. The company’s fabrics are marketed under the brand name “VIMAL”.
On November Dhirajlal H Ambani and Natvarlal H Ambani along with some other
existing shareholders offered for sale at par to the public. 28,20,000 equity shares of
the company in order to get the shares of the company listed on the stock Exchange at
Mumbai.
1979
During the year Sidhpur Mills co. Ltd which has an installed capacity of 38,368
spindles and 490 looms was amalgamated with the company. In terms of the scheme
of amalgamation, the company was to issue and allot for every one equity share of Rs.
100 each of Sidhpur, 2 equity shares of Rs. 10 each and one bond of Rs 80 of the
company.
The company allotted a total of 1,12,000 No. equity shares of Rs 10 each and 35,00011% bonds of Rs 80 each to the shareholders of Sidhpur Mills.
1982
5,50,000 – 13.5% Pref. shares issued as Rights to equity share holders. 19,20,000
equity shares issued to debenture holders (Series III) as per the terms of that issue.
815 No. of equity shares allotted out of the Rights issue of 1981.
1983
111,56,741 Bonus equity shares issued in Propn. 3;5, 64,00,000 No. of Equity shares
of Rs. 10 each issued in part conversion of Debs. (iv series ) on 30.9.1983. Of these,
24,00,000 shares issued as additional entitlement to debenture holders (iv series) on
account of bonus issue.
1984
101,24,675 No. of Equity shares allotted conversion of non-convertible portion of
debentures of series I, II, II and IV of the total value of Rs 7231.92 lakhs in Prop. 1:4.
equity shares of Rs. 10 each for every Rs 100 of debentures (100,28,359 shares in
1984 and 96,316 shares in 1985) 53,33,333 No. of equity shares issued (Prem. Rs. 40
per share) on part conversion of ‘E’ Series debentures as on 30.4.1985. rate of
dividend on 13.5% pref. shares increased to 15% effective from 16.5.1984.
1985
The name of the company was again changed from Reliance Textiles Industries Ltd to
Reliance Industries Ltd with effect from 27th June.
On 30th September Devti Fibres Ltd became a subsidiary of the company. Trishna
Investments and leasing Ltd. Reliance Industrial Investments & Holdings Ltd,
Reliance Petro products Ltd also subsidiaries of the company.
1987
Three letters of intent were converted into industrial licenses. Subsequent to 30th June,
all these industrial licenses were transferred to reliance Peotrochemicals, Ltd., a
company incorporated as a subsidiary of the company.
689,65,480 No. of equity shares allotted (prem. Rs. 62.50) per shares) in conversion
of ‘G’ series debs. Out of which 660, 30,100 shares allotted in respect of earlier
conversion of debs. 300,00,000 Rights shares than issued (prem Rs 50 per share; prop.
1:4) (all were taken up 14,60,000 additional shares were allotted to retain over
subscription for rights. Along with the Rights issue, 14.00,000 No. of equity shares
were offered to employees at a prem. Off rs 50 per share (under Employees Stock
Option Scheme ) but only 1,11,695 shares taken up. The balance 12,88,305 shares
allowed to lapse.
1990
During the year pursuant to the policy announced by Govt. regarding minimum
economic scale, the company embarked upon expansion of PTA capacity from
1,00,000 tones to 2,00000 tones per annum. The project is being undertaken in
technical collaboration with John Brown Engineers & Constructors Ltd. UK.
During the year the company entered into a Memorandum of Understanding with
West Bengal Industrial development Corporation Ltd. For setting up a join sector
project for the manufacture of 15,000 tones per annum of polyester filament yarn. In
December a joint sector agreement was entered into for setting up a new company
under the name Reliance Bengal Industries Ltd.
The technical collaborator for PFY and PSF was Dupont, US and for PTA, UOP
Processors, US and ICI, UK
1991
A technical collaboration agreement for 10 years was entered into with stone and
Webster Engineering Corporation USA for production of 4 lakh TPA of ethylene,
1,95 lakh TPA of propylene and 1.20 lakh TPA of mixed C4 stream. During the
period company commissioned its 1,00,000 TPA Ethylene Oxide and Mono Ethylene
Glycol plant at Hazira.
In series – ‘H’ Debentures, 304,00,000 – 12.5% secured redeemable partly
convertible debentures of Rs 150 each offered on Rights basis in the proportion 1
debenture: 5 equity shares held. Additional 45,60,000 debentures were allotted to
retain over subscription. 15,20,000 debentures were offered to employees’ on an
equitable basis. Only 15,00,000 debentures were taken up. The unsubscribed portion
of 20,000 debentures was allowed to lapse. Rs. 55 of the face value of each debenture
was to be converted into 1 equity shares of Rs 10 each at a premium of Rs 45 per
share at the end of 18 months from the date of allotment. Remaining Rs. 95 of the
face value of each debenture was to be redeemed at par on the expiry of 10 years from
the data of allotment.
In series – ‘J’ Debentures 76,00,000 – 14% secured redeemable non-convertible
debentures of Rs 150 aggregating to rs 114 cr attached with a detachable warrant, to
the equity shareholders on rights basis in the proportion of one debenture for every 20
equity shares held. Additional 11,40,000 debentures were allotted to retain over
subscription. The debentures of Rs 150 would be redeemed on the expiry of 10 years
from the date of allotment.
In Series – ‘K’ debentures 265,50,000 – 17.5% secured redeemable non-convertible
debentures of Rs. 100 aggregating Rs 265.50 cr to the equity shareholders on Rights
basis in the proportion of 1 debenture for every 6 equity shares held. These debentures
would be redeemed on the expiry of 10 years from the date of allotment.
1992
With effect from 1st March Reliance Petrochemicals Ltd. was merged with the Co. as
per the scheme of amalgamation, 1 equity shares of RIL was issued against 10 equity
shares held in Reliance Petro Chemicals Ltd.
13% Pref. shares fully paid-up 183,99,935 No. of Equity shares allotted till date as
again 92,00,000 Global depository shares 749,40,440 No. of equity shares allotted
shareholders of erstwhile Reliance Petroleum Ltd, under Scheme of Amalgamation.
1993
On May 27th the company offered 92,00,000 GDS representing 184,00,000 shares.
The company was awarded the medium sized discovered oil and gas fields for
exploration and production.
364,60,000 No. of equity shares allotted on part conversion of ‘H’ series debenture
100,05,586 No. of equity shares allotted again warrants issued.
3,16,667 shares allotted to SCICI on conversion of loans 103,16,027 shares allotted
underlying, 127,66,000 GDS issued on 15th FEB 1994 of which 81,66,571 shares
were yet to be allotted.
1994
Company issued 60,00,000 – 18% non convertible secured redeemable debentures of
Rs 100 each on private placement basis with financial institutions.
1995
On January the company issued 82,50,000 – 14% secured redeemable non convertible
debentures of Rs. 100 each on a private placement basis with financial institutions,
banks / bodies corporate.
On 23rd January the company allotted 600,00,000 – 14% secured redeemable nonconvertible debentures with detachable Warrants of Rs. 12.50 each.
During June, the company allotted 995,75,915 No. of equity shares of Rs. 10 each to
the erstwhile shareholders of Reliance Polypropylene Ltd (RPPL) and Reliance
Polythylene Ltd (RPEL) in the ratio of 30 equity shares of Rs 10 each for every 100
equity shares of Rs 10 each held in RPPL and 25 equity shares of Rs 10 each of the
company for every 100 equity shares of Rs 10 each held in RPPL.
Reliance Industries Ltd (RIL) has tied up with United Oil processing company of the
US, for production of paraxylene at Jamnagar.
In 1995-96, it entered the telecom industry through a joint venture with Nynex, US,
RIL is India’s largest private sector enterprise, is a major player in the Indian
petrochemicals sector 1996.
During the same year company undertook to implement 3 independent power projects
in separate entities with a total power generating capacity of 1331 MW at
Patalganaga, Bawana and Jamnagar.
15% Pref. Shares redeemed. 1908 shares out of these meant for amalgamation issued.
1997
Reliance undertook to make significant investments in Reliance Petroleum Ltd., for
setting up of the grass root refinery at Jamnagar, Gujarat
46,60,90,452 bonus equity shares allotted 7289149 No. of equity shares allotted at
conversion of debentures and reissue of forfeited shares.
The National Securities depository Ltd (NSDL) and Reliance Industries Ltd are
embarking on a joint marketing effort to issue RIL bonus shares in the demat form.
RIL was one of the first companies to join the depository and by issuing bonus shares
through the demat forms; investors will be assured of clean securities.
Around 57 lakh euro-convertible bonds of Reliance Industries Ltd. Were converted
into equity shares ahead of the book-closure for the 1:1 bonus issue on November 29.
Reliance Industries Ltd (RIL) founder and chairmn Dhirubhai Ambani was awarded
the prestigious the dean’s medal by the Wharton School (University of Pennsylvania)
at a glittering ceremony in Mumbai on 15th June.
Reliance Industries Ltd (RIL) has struck an understanding with the US based
engineering firm Carter burgess Ltd to undertake projects in the road sector through
the joint venture route. In the proposed joint venture, reliance will have the majority
stake. 65,00,000 redemption pref shares of rs. 100 each issued.
1999
The company undertook the commissioning of its Jamnagar Petrochemicals complex.
Reliance Industries Ltd is currently setting up a Rs 5,550 crores petrochemical
complex at Jamnagar.
Once again Reliance Industries Ltd (RIL)is in the international limelight. RIL been
named as one of the world’s 100 best-managed companies for the year 1999 by
industry week (IW), a leading US magazine.
During 1999-2000, the company competed its integrated Jamnagar complex, in a
record period of less then 3 years.
2000
Reliance has been ranked the second largest produced of POY and PSF in the world,
and the larges polyster manufacturer in India, with a market share of 51%.
Reliance is setting up a new venture for e-commerce related services and has roped in
National Stock Exchange’s head of market operations, derivatives, IPO and
membership Ashishkumar Chauhan for piloting the new project.
Reliance Industries Ltd. Wanted to buy back shares up to Rs 1,100 cr at rs 303
The company has informed that, Reliance Power Ventures Ltd., a wholly owned
subsidiary of the company, propose to acquire an aggregate of 2,75,45,133 fully paid
equity shares of BSEs of face value of Rs. 10 each at a price of Rs. 234/- per fully
paid up equity shares.
Issue of equity linked warrants under Employees Stock Option Plan.
The board has issued 5,26,87,851 equity-lined warrants under the ESOP in
accordance with the resolutions passed at the company’s 26th AGM.
Credit rating agency Crisil has assigned the highest safety rating of ‘AAA’ to the Rs
500 crore non-convertible debenture issue of the company.
Reliance holds a 30% interest in an unincorporated joint venture with Enron and
ONGC, to develop the proven Panna, Mukta and Tapti (PMT) oil and gas fields.
Enron has a 30% share and ONGC the balance 40% share.
2001
Fitch Ratings India Ltd. Has assigned ‘Ind AAA’ rating to the Rs 5000- crore nonconvertible debentures of the company
Reliance industries has raised its stake in Larsen & Turbo from 0.38 percent to 2.87
percent.
Reliance is the world’s third largest producer of paraxylene (PX), and the world’s
fourth largest producer of PTA. Within the country, reliance is the larges
manufacturer of PX, PTA and MEG, with a market share of over 80%.
Reliance is the largest producer of polymers in the country with a market share of
52%. Reliance has a capacity of nearly a million tones per year of polypropylene (PP).
400,000 tonnes per year of polythelene (PE) and 300,000 tonnes per year of
polyvinyle chloride (PVC).
In November 2001 Reliance Industries sold its just over 10% equity stake in Larsen &
Toubro the second largest player in the cement industry, to Grasim Industries for Rs.
766.5 cr. The divestment of the L& T stake is in consonance with its declared
objectives of unlocking value from its investments, in the interests of maximizing
overall shareholder value.
In January 2002, Reliance Petro investments have become a subsidiary of the
company, while Reliance Life Insurance Company and Reliance General Insurance
Company have ceased to be subsidiaries of the company.
In March 2002, the Board approved the proposal for amalgamation of Reliance
Petroleum Limited (RPL) with the company. The proposed scheme of Amalgamation
provided that the amalgamation will take effect from the appointed date i.e. April 1,
2001. All assets, liabilities and obligations of RPL will vest in the company w.e.f.
from the said appointed date. One equity share of the company will be allotted for
every eleven equity shares of RPL held.
Shareholders of Reliance Petroleum Ltd on April 15 approved the merger of RPL
with Reliance Industries Ltd at a meeting held in Jamnagar and convened under the
orders of the Gujarat High Court.
Reliance Industries acquires 26% state & management control in Indian
Petrochemicals Corporation Ltd. (IPCL) by paying Rs 1490.84 cr to Government of
India.
2003
Shuts down the aromatics plant at Jamnagar, Gujarat company’s Hazira
manufacturing unit gets IMC-Bajaj quality award 2002
Anil Ambani appointed as BSES MD
Reduces stake in BSES from 55% to 49.5% and BSES ceases to be subsidiary of the
company due to the disinvestment
Foreign institutional investors (FIIs) convert 24 million shares of the company into
global Depository Receipts (GDRs)
Oil discovered in RL’s exploration block 9 in Yemen in which the company holds
20% shares
Anil Ambani, Vice Chairman & Managing Director, voted as MTV Youth Icon of the
year.
Mukesh
Ambani
chairman
and
managing
director
(CMD),
donates
$2million to health programs of the international federation of Red Cross (IFRC) and
Red Crescent Societies.
Reliance exhorts NTPC Kayamkulam plant transplantation to Kakinada
2004
Reliance Jamnagar refinery voted best among 50 refineries worldwide Gujarat gives
away Gujarat Garima Awards to Tata, Ambani
Reliance Industries Limited (RIL) has increased the capacity of its Jamnagar refinery
to 33 million tones from 30 million tones.
Mukesh Ambani ranks 40th in the world business leaders
Reliance joins hands with Gail for Indo-Iran natural gas pipeline project
Reliance Industries country’s largest private sector company, has surged ahead of
global players after it posted a net profit of more than $1 billion in 2003-04
RIL chairman wins Asia Society Leadership award
2005
Reliance Industries Ltd was awarded the ‘international Refiner of the year’ 2005 at
the World Refining and Fuels Conferences’ awards ceremony held in San Francisco
on March 10, 2005.
Reliance Industries wins annual ‘2005 ASTD Best Awards’ from American Society
for Training & development.
Reliance Industries wins two National Energy Conservation awards
Reliance industries bags ‘National Awards for R & D Efforts in industry – 2005’
2006
RIL commences the setting up of a new export-oriented refinery through its
subsidiary, Reliance Petroleum Limited (RPL). The refinery will have a total
atmospheric distillation capacity of approximately 580,000 barrels per stream day
with a Nelson Complexity of 14.0 and an integrated polypropylene plant with a
capacity of 0.9 Million TPA. The capital cost of the RPL project is estimated at Rs
27,000 crore (approximately US$ 6 billion). RPL completes its US$ 1.2 billion Initial
Public Offering of equity shares which received an overwhelming response across
different classes of investors.
Reliance's debt ratings from S&P and Moody's pierce India's sovereign ratings.
Reliance becomes India's first private sector enterprise to cross US$2 billion profit
mark.
2007
Value creation through integration - A landmark merger of Indian Petrochemicals
Corporation Limited (IPCL) with Reliance Industries Ltd. (RIL) has been completed.
Reliance Retail entered the organised retail market in India with the launch of its
convenience store format under the brand name of ‘Reliance Fresh’.
The world’s largest polyester expansion project commissioned during the year. We
brought a Polyester capacity of 550 KTA on stream at globally competitive costs in a
record time of eighteen months. With this expansion, our polyester capacity has been
augmented to 2 million tonnes per year. Subsequently, Reliance now have 4% of
global polyester capacity and 6% of global production.
During the year, we expanded our polypropylene (PP) capacity by 280 KTA at
Jamnagar that increased the combined capacity to 1,710 KTA. With this expansion,
we now have 3.5% of global PP capacity and 3.6% of global PP production.
2008
During the year, Reliance signed an agreement to acquire certain polyester (capacity)
assets of Hualon, Malaysia.
In the Refining & Marketing business, Reliance took over majority control of Gulf
Africa Petroleum Corporation (GAPCO) and started shipping products to the East
African markets.
Reliance also signed MoU with GAIL (India) Limited to explore opportunities of
setting up petrochemical plants in feedstock rich countries outside India.
Reliance Petroleum Limited (RPL) continued the second year of implementation of its
refinery project with an overall project progress of 90%.
During the year, Reliance Retail Limited (RRL) continued its rollout of stores across
various verticals and formats. Reliance Retail today operates over 590 stores in 57
cities, spanning 13 states, with over 3.5 million square feet of trading space.
2009.
RPL merger with RIL: Value creation through scale and synergies - The merger of
Reliance Petroleum Limited (RPL) with Reliance Industries Limited (RIL) has
enabled seamless integration of operational scale and financial synergies that existed
between the two Companies. Assets and liabilities of RPL have been transferred to
RIL with effect from 1st April 2008, as per the approval granted by the Hon. High
Courts of Mumbai and Gujarat. Shareholders of RPL received 1 share of RIL in lieu
of every 16 shares of RPL held by them, as per the scheme of merger. Accordingly,
6.92 crore new equity shares of RIL have been allotted to the shareholders of RPL.
RIL joins the league of global deepwater oil and gas operators - RIL commenced
production of hydrocarbons in its KGD6 block in the Krishna Godavari basin with the
production of sweet crude of 420 API. The production of oil in KG-D6 was
commissioned in just over two years of its discovery, making it the world’s fastest
green-field deepwater oil development project.
RELIANCE INDUSTRIES:
CORELATION BETWEEN MARKET PRICE AND DEVIDEND PER SHARE
YEARS
X (MARKET
Y (DPS)
(x-x-)
(y-y-)
(x-x-)2
(y-y-
(x-x-)(y-y-)
)2
PRICE )
2005
410
5
-498
-3
248004
9
1494
2006
551
6
-357
-2
12744
4
714
2007
681
8
-227
0
51529
0
0
2008
1082
21
174
13
30276
169
273
2009
1816
0
908
0
824464
0
0
4540
40
0
8
1281722 182
R = 0.17
2481
As per our calculation, the correlation between market value and dividend per share
for the last 5 year is positive less than 0.50. But my observation says that market value
of shares is increasing in the last 5 years which indicates, company is a growth firm.
3.5
Company History State Bank of India
On 1st July State Bank of India was constituted under the State Bank of India Act
1955, for the purpose of taking over the undertaking and business of the imperial
Bank of India. The imperial Bank of India was founded in 1921 under the imperial
Bank of India act 1920. The Bank transacts general banking business of every
description including, foreign exchange, merchant banking and mutual funds.
1959
On September State Bank of India (Subsidiary Bank) Act was passed. On October
State Bank of Hyderabad become the first subsidiary of SBI.
1960
During this period, State Bank of Jaipur, State Bank of Bikaner, State Bank of Indore,
State Bank of Travancore, State Bank of Mysore, State Bank of Patiala and State
Bank of Saurashtra became subsidiaries of the bank.
1962
The Bhor State Bank Ltd was Amalgamated with the Bank bring the total number of
minor State associated banks so amalgamated to five. A scheme for amalgamation of
the Bank of Aundh Ltd. Was also approved. On 20th August, the Unit Bank Ltd.
Chennai was taken over by the Bank.
1963
In October Branch in London become bankers to the Indian High Commission,
thereby taking over a function till then performed by the office of RBI. Of the other
business transacted by the Branch, an important aspect was medium term loans
mostly to Indian shipping companies.
1969
On November 8th the Bank of Behar Ltd was amalgamated.
1972
A merchant banking division was set up in the central office to cater to promotional
needs of the corporate sector.
1977
During the year bank introduced the Perennial Pension Plan Scheme under which if
the depositors make a regular monthly payment of a fixed amount of a period of 84 to
132 months, they become eligible from the 86th and 134th months respectively for
getting a monthly pension of predetermined amount forever.
In order to meet all the developmental needs of the villages including their social and
cultural needs, the bank launched an integrated rural development program, aimed at
not only covering the credit needs of agriculture and agricultural activities and village
industries but also housing and social activities.
1980
Bank introduced the cash certificate Scheme under which deposit certificate are
issued for a fixed period on payment of the issued price specified for the respective
maturity period and the face value corresponding to the issue price plus interest
compounded at quarterly intervals is paid on maturity. The certificates are issued for
the face value of Rs 100, Rs. 1000, Rs. 10,000 and Rs 50,000 maturing after 29,65,84
and 120 months.
1982
The Non-Resident Investment Cell was set up, which had streamlined the working
operations of the non-resident investment sections at important centers.
1983
SBI launched self employment scheme, for providing self-employment to educated
unemployed youth, Educated unemployed youths are encouraged to undertake selfemployment ventures in industry, services and business.
1985
During the year, company set up a data bank of sick units available for taken over by
healthy units. With effect from 26th August the Bank of Cochin Ltd with 108 branches
was also amalgamated with the Bank
(i)
All shares in the Capital of the imperial Bank of India were vested in the
RBI. The SBI was registered with an Authorized capital of Rs. 20 cr. And
an issued and paid up capital of rs. 562, 50, 000 divided into 562,5000
shares of Rs 100 each
(ii)
Every person who on the 30th June 1955 was registered as a holder of
shares in the imperial Bank of India was paid by the Reserve Bank of
India. 44,37,500 No. of shares issued at a premium of Rs. 160 per share.
1986
At the end of the year 324 sick units with an outstanding of Rs 1069 cr were assisted.
Of these, 107 units were considered viable and 60 from them were placed under
regular nursing program.
On 1st August a new subsidiary named SBI Capital Market was functioning
independently took up leasing business and certain other new services.
100,00,00 No. of shares issued at a prem. of Rs. 160 per share.
1987
In terms of deployment, the advances portfolio of overseas offices rose to Rs 5767 cr,
investments in inter-bank money markets and also in prime securities amounted to Rs
2670 cr by the end of the year.
1988
Also a scheme to develop entrepreneurship among woman under the name “Stree
Shakti” was launched. Several concessions in respect of margin and rate of interest
have been built into package. Three pilot programs were launched at Chennai,
Calcutta, and Hyderabad.
The bank sponsored 30 RRB’s covering 66 divisions in the country. 74 branches were
opened raising the branch network to 2306.
1989
During the same period SBI in association with Morgan Stanley Asset Management
inc, of USA launched the India Magnum Fund.
1990
New products launched during the year included a Regular income Scheme, offering
an assured return in excess of 12% and the first Pure Growth Scheme aimed at capital
appreciation. A second offshore fund of US $12 million called Asian Convertible and
Indian Fund was launched in association with Asian Development Bank, Manila.
As on 31st March, SBIMF had over 340,000 India investors and about Rs 475 cr of
investible domestic funds.
50,00,000 No. of shares issued at a prem. Of Rs 160 per share. 1991 – during
February the bank set up a new subsidiary called the SBI Factors and Commercial
Services Pvt. Td for rendering factoring services to the industrial and commercial
units in Western India.
1992
The bank sponsored 30 RRBs with a network of 3189 offices covering 102 backward
and under banked districts of the country. A sum of Rs. 15.25 cr was contributed
towards the share capital of the RRBs.
1993
During December, the bank issued 124,000,000 equity shares of Rs 10 each for cash
at a premium of 90 per share of which 245,00,000 shares each were reserved for
allotment on a preferential basis to Indian financial institutions and Indian Mutual
Funds. Balance issued to the public.
Simultaneously it cam out with another issue of 50,00,000 12% unsecured redeemable
floating rate bonds in the nature of promissory notes of the face value of 1000 each.
Oversubscription upon a further amount of Rs 500 cr ( in all Rs 1000 cr) was to be
allowed. The face value of each bond would be redeemed at par at the expiry of 10
years from the date of allotment. In the event that the State Bank decides to exercise
tis option to call up the bonds they would be redeemed at the rate of 5% at the end of
5th year, at 3% at the end of 7 the year and 1% at the end of 9th year.
It was proposed to issue 1200,00,000 right equity shares of Rs. 10 each at a premium
of Rs. 50 per share in the proportion of 3:5. also another 120,00,000 equity shares of
Rs 10 each were to be issued at a premium of RS 50 per share to employees on an
equitable basis.
250 sick units with the bank were referred to the BIFR including 31 public sector
units. Approved rehabilitation packages being implemented in 85 units and 41 have
been recommended to be would up. The bank continued to be appointed as the
operating agency and rehabilitation packages were submitted to BIFR in 48 cases.
Equity shares subdivided, 1418,50,000 No. of Equity shares of Rs. 10 each issued at a
prem. of Rs 90 per share to the public. Another 1319,78,726 shares of RS 10 each
offered at a prem. of RS 90 per shares on Rights basis and to employees.
1994
358 sick units with the bank were referred to the BIFR including 55 public sector
units. Approved rehabilitation packages implemented in 87 units.
1,80,463 No. of shares kept in abeyance were issued.
1995
351 sick units with the bank were referred to the BIFR including 66 public sector
units. Approved rehabilitation packages implemented in 112 units.
683 No. of shares kept in abeyance were allotted.
1996
On 3rd October the Bank issued 261,45,000 GDRs amounting to 5,22,90,000 equity
shares. 1 GDR is issued to 2 equity shares. The issue price of GRD was US $ 14.15
per GDR.
1997
Shares issued to employees of the bank bearing distinctive number 46,26,00,000 to
47,46,00,000 will not be good delivery. The rights issue was for 12 cr equity shares at
a premium of Rs. 50 aggregating Rs. 720 cr in addition to a further issue of 1.2 cr
equity shares of Rs. 10 at a premium of Rs. 50 aggregating Rs 72 cr for State bank
employees. The price of the right had been Rs. 50 per share.
After SBI capital markets, Manila-based Asian Development bank will pick up 15 per
cent equity stake in the new stock broking subsidiary of the State Bank of India to be
made operational by mid-1997. the balance 85 per cent will be subscribed to by SBI.
SBI Securities Ltd the 100 percent stock broking subsidiary of SBI has recently
received the much-awaited letter of incorporation from the Registrar of Companies.
Following this, both SBI and ADB will pick up their respective shares in the new
stock broking firm. SSI will have an equity base of Rs 50 cr.
State Bank of India (SBI) signed an agreement with the National Securities
Depository Ltd (NSDL) for dematerialization of its shares. Besides, SBI has also
become an equity stake holder in NSDL to the extend of 4.76%
1999
State Bank of India (SBI) has bagged the mandate to syndicate the $120 million loan
for the National Thermal Power Corporation (NTPC).
The state Bank of India (SBI) proposes to take up the life insurance and general
insurance business once the sector is opened up.
The State Bank of India (SBI) has signed up with central Depository Services (I)
(CDSIL) for the dematerialization of its shares.
SBI shares have already been admitted as security with National Securities depository
(NSDL). Besides, SBI also has a stake (Rs. 10 cr) in the equity of CSDL.
According to an agreement entered into with the development bank, State Bank of
India (SBI) was to reduce its stake in its investment banking subsidiary to below 50
percent by March 31
The State Bank of India (SBI) has entered into an agreement with Moody’s Inventory
Services and Icra, under which SBI will pick up Moody’s 11 per cent stake in Icra in
case the global rating firm wants to get out of its investment in India.
2000
The Bank has proposed to come out with an issue under private placement of
unsecured, non-convertible, subordinated bonds in the nature of promissory notes of
RS 1 lakh each aggregating Rs. 600 cr with an option to retain oversubscription of up
to Rs 40 cr.
The Bank launched the “Metal (Gold Loan Scheme” in Coimbatore. This is the third
scheme to be introduced by SBI.
SBI is also forming a subsidiary – SBI Gold and Precious Metals Pvt. Ltd with 50 per
cent equity participation.
State Bank of India Mutual Fund has launched the Magnum Gilt Fund, dedicated to
investing in government securities.
2001
State Bank of India has slashed the interest rate on home loans by 0.5 per cent to 12
per cent, effective from September 15
In a significant move, the State Bank of India has decided to distance itself from its
subsidiaries – SBI Capital Markets, SBI Gilts, SBI AMC and State Bank of Credit and
Commerce International. They will have the autonomy, independent chairmen and
external executives at the senior management level at market-related salaries. At
present, the SBI chairman is the ex-officio chairperson of all the subsidiaries,
including the associate banks.
VRS implemented in which around 21,000 employees, including officers, were
permitted to retire.
The Bank has crossed another milestone by making a successful foray into insurance.
SBI is the only Bank to have been permitted a 74% stake in the insurance business.
The Bank’s insurance subsidiary, SBI life Insurance Company, a joint venture with
the Bank holding 74% and Cardiff S.A., the joint venture partner, the balance 26%,
was incorporated to undertake life insurance and pension business. Cardif S.A. is a
wholly owned subsidiary of BNP-Paribas, which is the largest bank in France and one
of the top ten banks in the world. Cardif S.A is the largest bancassurance company in
France.
2002
In order to reduce risk and develop a transparent and active debt market in general
and government securities market in particular, the Clearing Corporation of India Ltd,
has been set up in Mumbai with the Bank as the chief promoter.
State bank of India has informed BSE that the Bank has decided to close SBI
Securities Ltd (SBISL0, s subsidiary of the Bank, following a Directive in this regard
from the RBI. SBI group’s total profit identified at rs. 3354 cr in 2002
SBI Cards and Payment Services Private Ltd, the credit card subsidiary of the State
Bank of India, introduces two new schemes recently – SI Advantage Card to the
Bank’s fixed deposit customers and SBI International Card for its home loan
borrowers.
2003
Increases its equity stake in Discount and Finance House of India Ltd (DFHIL) to
51% increases its equity State in DFHIl to 55.30%
Orders for 1500 ATMs with NCR Corporation
NPA (None Performing Assets) slashed to 4.5 pc, writes off Rs. 4000 crore worth of
assets.
Forays into stock market
Stock price crosses the Rs 400 mark for the first time since listing on BSE
Plans a new scheme to attract resurgent India Bonds (RIB)
Inks tow important agreements with its employees unions and officers associations.
According to the contract SBI staff will be having no rights to interfere in bank’s
computerization plans.
SBI joins hands with LIC to dentify long-term investment proposals for LIC
2004-2005
The government has chosen State Bank of India (SBI) for channelizing government
credit to other countries which runs into billions of dollar.
Buys 10% stake in Multi commodity Exchange of India Ltd. (MCDEX) for Rs 2.1 cr.
2006-2007
SBI signed a memorandum of understanding with small industries development bank
of India for co-financing small and medium enterprises in Andhra Pradesh, Tamil
Nadu, Uttar Pradesh, Jammu & Kashmir, Jharkhand, Delhi and Bihar.
State Bank of India and Crisil has signed a memorandum of understanding under
which latter will assign ratings to small-scale industries that are borrowers of SBI.
NSIC join hands with SBI to offer credit to SSI
State Bank of India has roller out a micro insurance scheme “Grameen Shakti”, for its
self help group (SHG) members. The product was launched on November 26 at the
Tamil Nadu Agricultural University. The bank is hopeful to cover at least five lakh
SHG members by December 31.
The company has issued rights in the ratio of 1:5 at a premium of Rs 1580/- per share.
CORELATION BETWEEN MARKET PRICE AND DEVIDEND PER SHARE
YEARS
X (MARKET
Y (DPS)
(x-x-)
(y-y-)
(x-x-)2
(y-y-
(x-x-)(y-y-)
)2
PRICE )
2005
415
8.5
-382
-3.5
15924
12.25
1337
2006
602
11
-195
-1
38025
1
195
2007
773
12.5
-24
0.5
576
0.25
-12
2008
926
14
129
2
16641
4
258
2009
1267
14
472
2
222784
4
944
3985
60
423950
21.5
2722
R = -0.90
As per our calculation, the correlation between Market value and dividend per share
for the last 5 year is positive and more than 0.50. but our observation says that market
value of shares is increasing in the last five years which indicates, company is a
growth firm.
4. CONCLUSION
The market price of the share of the company depends on many factors like dividend
payout, demand and supply of securities, government policies, financial position of
the company, and activities of financial institutions etc. therapeutically increase in
dividend payout may positively influence market price of the share of the company.
So there is a linear relationship between dividend and market price. But, the analytical
study shows that the linear relationship does not always exists, i.e. higher the
dividend, higher the market price of the share does not always hold. From the study it
is evident that the market price of the share is a reflection of many factors and
dividend is but one of the many factors that influence the market price. Even though
the dividend payment increase market price sometimes falls. It is difficult to identify
effect of dividend in short run but the long run effect on share price cannot be
underestimated.
5.
BIBLIOGRAPHY

Financial Management by Prasanna Chandra.

www.bseindia.com

www.nseindia.com

www.google.com

www.moneycontrol.com
visit to :

Ahmedabad Management Association, Vastrapur, Ahmedabad

S.D. School of Commerce, Gujarat University, Ahmedabad