Lakme proposes 600 interim dividend

MUMBAI, April 13: The board of directors of Lakme Ltd has proposed an interim dividend of Rs 60 per share 600 per cent for the year 1997-9...

MUMBAI, April 13: The board of directors of Lakme Ltd has proposed an interim dividend of Rs 60 per share 600 per cent for the year 1997-98. This dividend payout, the largest to be declared by a listed company so far, will absorb half of the proceeds of Rs 159 crore realised from the sale of its entire cosmetics business to Hindustan Lever Ltd. However, the board has not taken any decision on merging Lakme with any other Tata company.

The company has proposed to pay substantial dividends in two stages including an immediate interim dividend representing most of the profit after tax for the 15-month period ended June 1998. The company has also decided to extend its financial year 1997-98 to a 15-month period ended June 1998.pLakme8217;s dividend plans failed to enthuse market men. On the National Stock Exchange, the scrip fell to Rs 200.30 after opening at a high of Rs 227. On the BSE, the scrip touched an intra-day low of Rs 205 after the dividend was announced. The scrip finally closed at Rs 212. The marketwas expecting a high dividend pay-out of over 1,000 per cent as it was reduced to a shell company without any business operations.

8220;The maximum dividend that can be paid after providing for statutory reserves and dividend tax, for the first stage, would be about Rs 60 per share,8221; it said. The first interim will be made only after shareholders approve the sale of brands and plants of the company at the EGM. The company intends to recommend a quot;substantial large dividendquot; in the second phase. However, this second dividend has been proposed to be paid at a later date out of a part of the past-accumulated profits. But, this is subject to obtaining certain further legal and statutory approvals, said the company press release.

The company said that a significant part of the total available funds would be paid out to the shareholders in the form of dividends which would be tax free in their hands under prevailing laws. The company has convened an extraordinary general meeting EGM of its shareholders on May14 to approve the divestment of its 50 per cent stake in the joint venture Lakme Lever limited and the sale of its cosmetics manufacturing facilities. The sellout of the manufacturing facilities of Lakme will ensure a cash inflow of Rs 29 crore into its coffers, along with the Rs 130 crore already netted from sale of its brands and 50 per cent stake in Lakme Lever. The company has decided for the moment to retain at least half the proceeds of the sale. At Rs 79.52 crore, the payout comes to almost half of the cash inflow due to the recent transactions at Rs 159 crore.

This does not take into consideration the substantial reserves of the company, which stood at a whopping Rs 131.88 crore at the end of the previous financial year. The reserves level right now could not be ascertained.

The company added that from the balance, a certain portion will be used for the business needs relating to the investment in the new retailing activity which the company8217;s subsidiary has already entered into. quot;The balance ofthe funds will be used to ensure the generation of sufficient income and profits in order to pay dividends to its shareholders till the new retailing activity generates adequate profits,quot; it said.