SHCIL has declared an unprecedented dividend of 900%. What is the reason behind this lavish payout?
Stock Holding Corp of India Ltd (SHCIL) has announced a staggering cash dividend of 900%. According to informed sources, this entire dividend is the amount SHCIL earned by selling its 2% stake in the National Stock Exchange (NSE). Officials from SHCIL were not immediately available for comments. SHCIL has appointed MXV Consulting, management consultants to deploy the windfall cash, but in the absence of a firm business plan for profitable deployment, SHCIL decided to pay out the money. SHCIL has realised almost Rs250 crore as staggered divestment of a part of its NSE stake via IDBI Capital Markets.
This is a bonanza for its shareholders IDBI Bank, ICICI Bank, IFCI, administrator of the specified undertaking of the Unit Trust of India, LIC, GIC and the other four general insurance companies. SHCIL sold its 2% shares in NSE through IDBI Capital Markets for about Rs250 crore, thus reducing its stake to 5%. Earlier, SHCIL had declared an interim dividend of 130%, but soon after the stake sale, it announced a whopping dividend of 900%. Last year, it had declared a dividend of 50%.
Interestingly, SHCIL's paid-up capital is just Rs21.10 crore. For FY07 and FY08, SHCIL had declared a dividend of 50% and earnings per share of Rs23.17 and Rs32.85, respectively. However, for FY09, its dividend went up to a staggering 165% with EPS of Rs31.52.
SHCIL achieved a profit before tax (PBT) of over Rs101 crore for the year to end-March 2008 thanks to a massive bull run. Its managing director and chief executive RC Razdan had announced a target to double the PBT for the year ending in March 2009. But, it was able to achieve a PBT of just Rs90.20 crore as against a target of Rs200 crore. This was covered up by paying an interim dividend of 130% and a final dividend of 35%, taking the total dividend for FY09 to 165%.
SHCIL has been deeply mired in controversy for its e-stamping project planned several years ago. It has been under investigation by the Serious Frauds Office for various shenanigans. Insiders say that this unprecedented dividend payout is given to favour the guilty and secure the protection of its shareholding institutions. After the huge dividend payout, charges against SHCIL will turn stale. If this is true, then shouldn't the Ministry of Corporate Affairs act on the SFIO report, pending since ages?
The story of SHCIL does not end here. Even market regulator Securities and Exchange Board of India (SEBI) has not renewed SHCIL's custodial license that expired on 31 October 2009, while all other custodians got it renewed for three years.
—Sucheta Dalal with Yogesh Sapkale firstname.lastname@example.org