The board of directors of Nestle India has approved a scheme which entails utilisation of the balance amount in the Share Premium Account and part of the balance amount in the General Reserve Account formed by the excess transfer of surplus profit in earlier years. After approval of the scheme by the shareholders, creditors and the Delhi High Court, the amount will be returned to the shareholders in cash after paying applicable taxes.Under the scheme, an amount of Rs.43.23 crore lying in the Share Premium Account and an amount of up-to Rs 43.09 crore voluntarily transferred by the company to its General Reserve Account during the years 1981 to 1997, in excess of the prescribed 10 per cent of the profits of the company under the provisions of the Companies (Transfer of Profits to Reserves) Rules, 1975 will be utilised for returning cash to the shareholders after paying taxes as applicable at the time of distribution.“The board has approved the scheme in the interest of the shareholders as returning cash will give them an opportunity to earn better returns as compared to those, which the company can earn by investing in short term liquid instruments. All the shareholders will receive proportionate amount for every equity share held in the company,” it said. However, the Indian company’s parent Nestle of Switzerland will be a major beneficiary from the scheme as it holds majority controlling stake in Nestle India.The company said the scheme will further enhance the return on equity, provide an opportunity to leverage the balance sheet which in turn could further optimise the cost of capital and thus improve the economic value. The company will make necessary applications to the Delhi High Court for its directions for convening a meeting of chareholders/creditors to seek their consent after obtaining approval of the Bombay Stock Exchange to the scheme.
