Skip to main content

IPO documents may have to state dividend policy

By
The Securities and Exchange Board of India ( Sebi) might compel disclosure of a companys dividend policy in an initial public offering ( IPO) prospectus.
“Companies could be asked to state their dividend policy upfront in the draft prospectus.
This would provide clarity on the company’s philosophy, in terms of repaying shareholders,” said a source.
Another source adds that the entire InterGlobe Aviation episode has not escaped regulator attention and Sebi’s move appears to be a result of this. The airline operator paid a heavy dividend to its promoters just ahead of its IPO, rendering its net worth negative.
The move had drawn criticism from analysts.
Currently, the regulator is engaged in discussion with market participants on proposed dividend disclosure norms and the format. Before forming any regulation, Sebi will issue a discussion paper.
Surces add that Sebi could ask companies to declare a minimum dividend payment as a percentage of its earnings.
“A shareholder has the right to know that if a company is not paying out dividend, what it company intends to do with their cash," said Amit Tandon, founder, IiAS, a proxy advisory firm. Declaring a dividend policy brings needed clarity to shareholders and injects discipline on companies, he said.
The markets regulator is also working on a framework on a dividend policy for listed companies, something termed overly micro management by some. “ I do not believe Sebi is micro managing. If at all, they are micro managing in favor of corporates and not going far enough. In fact, companies should take shareholder approval to retain cash; after all, the money belongs to the shareholders,” said Tandon.
Some experts believe it is critical to generate a cash pile as a war chest against difficult market conditions or for potential acquisitions.
At present, dividend policy comes under the Companies Act and Sebi has no specific guideline on payout.
However, it can step in if acompany had failed to pay dividend it had promised to shareholders.
Under the Companies Act of 2013, a company is required to pay out dividends from profit arrived at after depreciation. In the past, the markets regulator has introduced several tweaks to the IPO disclosure requirements. One such change includes stating the record of investment banks handling the IPO. The revised offer document has a section on the post- listing performance of an IPO, handled by investment banks.
SEBI LENS ON DIVIDEND
  • Could be asked to declare minimum dividend payment as percentage of earnings.
  • It’s a fallout of IndiGo where company made dividend payment before the IPO.
  • The Companies Act governs dividend policy of firms and Sebi can step in, if company doesnt make payments as promised.
Business Standard, New Delhi, 6th Nov. 2015

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more