The Hindu Business Line : Colgate to give out Rs 9 as deemed dividend

Mumbai May 3 Colgate Palmolive Ltd said on Thursday that it would pay Rs 122.40 crore (excluding dividend distribution tax) to shareholders by giving out Rs 9 per share as "deemed dividend" as part of its proposal to reduce equity capital.

The company will reduce the face value of the existing shares to Re 1 a share from Rs 10, said a company release.

The amount will be returned to the shareholders from the company's surplus cash. As a result, the company's share capital will reduce to Rs 13.6 crore from Rs 136 crore, the company said in an analyst presentation.

The company will pay dividend distribution tax at 17 per cent, which works out to be Rs 20.8 crore.

"The reduction of capital, which is in excess of the wants of the company, is proposed under Section 100 of the Companies Act and will be achieved by reducing the face value of the existing shares... " the release said.

Colgate currently has Rs 313 crore of cash in the balance sheet. Even after this exercise, the number of outstanding shares of the company, its P/E ratio or EPS will remain unchanged, according to Mr Lalit Thakkar, Director-Research, Angel Broking.

If anything, it could lead to a slightly higher P/E ratio as there would be a higher return on equity on the overall smaller balance sheet of the company post the dividend, said Mr Sumeet Budhiraja, FMCG Analyst, Edelweiss Securities Pvt Ltd.

The promoter group (overseas) now holds 51 per cent stake in the company.

JM Morgan Stanley Private Ltd is the financial advisor to the transaction. The company's scrip jumped by 2.24 per cent on the BSE today to close at Rs 351.8.

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