Issues never come singly they always come bunched up. Global markets were seized of the complex issue of Greece and how to handle a leader who had political acumen and came up with a referendum prior to the deadline when out of the blue China cropped up. This was too much for the markets to handle and they cracked. India which had held out quite well to the Greece drama could not resist the China onslaught and lost close to 2% on a single day when China unfolded. One man’s crisis is another man’s opportunity and this appears to be the case for India. India introduced economic reforms in 1991 and allowed FII’s to invest in India in 1992-93. Its over 23 years and there have been various crisis whether it be the KP scam or the 2008 global meltdown, India has never ever imposed restrictions on investors selling shares that they owned. China did exactly that and said that all promoters and also investors owning more than 5% cannot sell shares for six months.
One needs to understand some basic differences between China and India investors. In China 80% of shares are owned by retail investors while in India it is between 22-23%. Chinese investors are highly leveraged and resort to borrowing against shares to buy more shares. Here in India this is not a widely followed practice. Therefore when markets fell 40% in a month after hitting a high in June, all hell was let loose. The markets saw half the shares being not traded as trading was suspended. There is a practice which allows companies to suspend trading in their shares. This saw pressure on other shares which were being traded and the meltdown continued. Regulators then specified that suspension cannot be indefinite but only for three days.
This is a blessing in disguise for India as we have never imposed restrictions on investors and followed uniform principles. This will gradually shift money in time to come to India. It’s not something which will happen tomorrow but over time.
Quarterly result season has begun and there is hope from market participants that the turnaround being desperately looked for would be there this time around. TCS results on Friday were substantially better than what were expected.
Greece has been bailed out twice before since 2010 and this would be the third time that they are seeking a bailout. The creditors are becoming tougher and smarter because they understand that the people of Greece are unable to accept ground realities and change to the given circumstances. Greece in all probability will fail sooner or later and every passing day will add to the certainty of talks failing or a solution being found. World markets are also veering around to that.
The primary markets is the place where plenty of action seems to be playing out. Shares of Manpasand Beverages Limited listed on Thursday and amidst the Greek and Chinese drama managed to eke out gains. Shares which were issued at Rs 320 closed with gains of about 4%.
Interglobe Aviation Limited the company which owns Indigo airlines filed it DRHP on the 1st of July. Life is all about learning and it’s never too late to learn and one continues to learn every day. One always thought that dividends are paid from profits earned and for the period for which results are declared. Here we have a company which has declared interim dividend for Fiscal 2016 when they are yet to declare results for the year ended March 2015. Strange are the ways things happen.
Yet another way to look at it is the fact that dividend can only be given from profits and futuristic statements cannot be made by a company going public. So would it be fair to assume that when a company announces a dividend for a period which is yet to happen it is presupposing that it will earn profits and is therefore giving a dividend. Could a prospective investor take this company to the regulator that this dividend which has been given for a period yet to happen is stating the future and hence not permitted? Debatable but interesting.
High dividend pay outs were a prerogative of the MNC’s and then the government PSU’s. They had a good pay-out ratio. Interglobe Aviation Limited has put all of them to shame. The dividends paid out for the year 2014-15 are more than the declared profits for the year. The company paid on 12th January 2015, an interim dividend of Rs 5,932.37 million and on 23rd March 2015 it paid Rs 2,260.23 million making a total of Rs 8,192.60 million. Hold your breath the profit after tax for the nine month period ended December 2014 was Rs 7,208.39 million. If memory serves me right dividend payout cannot exceed the year’s profit. This was a condition in the new companies act and if it be so how could this company do so? A company going public has half the country’s lawyers and chartered accountants on its payroll to complete due diligence with the merchant bankers. I am sure the roadshows of this company would be interesting as and when they happen.
The story does not end here. The company has announced an interim dividend on 19th June 2015 of Rs 997.38 million which makes the grand total of Rs 9,189.98 million. As an analyst is one to understand that the company has made a net profit of Rs 9,189.98 million for the year ended March 2015 and therefore they have paid that entire amount as dividend. Readers the icing on the cake for shareholders of privately held Interglobe Aviation Limited now comes in the form of interim dividend for the fiscal 2016 of Rs 10,029.10 million. What brilliant accounting and what a way of telling the world that the best of Interglobe Aviation Limited is over. The dividend paid out amounts to Rs 32,615 per share of Rs 1000 face value and if annualised to Rs 10 still amounts to Rs 326.15. FANTASTIC DIVIDEND. Prospective investors watch out for this issue. Any promoter who enriches himself in this manner certainly doesn’t have the heart of investors in mind.
I am unable to write anymore and would like to end here allowing you the reader to decipher what you make out of it. Your views would be most appreciated on such a topical event.
