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Thursday, Jul 04, 2002

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Money & Banking - Housing Finance

HDFC subscribes to 6.9 pc preference shares of RIL

Our Bureau

MUMBAI, July 3

HDFC Ltd has subscribed to 6.9 per cent redeemable preference shares of Reliance Industries Ltd, aggregating Rs 200 crore.

The coupon of 6.9 per cent is perhaps the lowest-ever offered by an Indian company on preference shares.

An HDFC spokesman said the preference shares were redeemable after three years.

He said even though the coupon rate on the shares was 6.9 per cent, a tax provision under Section 80M of the Income Tax Act would enable a yield of about 11 per cent.

Under Section 80M, dividend-paying companies are allowed tax exemption on the dividend received on their investment to the extent of the dividend outgo for the year.

HDFC paid a dividend of 250 per cent last year, the total outgo working out to about Rs 300 crore. The payout allows the housing finance company to earn an interest-free dividend up to Rs 300 crore.

The spokesman said the preference share dividend would be free of dividend tax as it would be set off against the payout.

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