Economic turmoil dents bonus issue declarations

Written by Pradip Kumar Dey | Mumbai | Updated: Mar 15 2009, 04:17am hrs
Hit by the ongoing economic slowdown, the total number of companies that declared bonus during 2008-09 (up to March 12) stands at 54. This represents a 24% decline in the number of companies that declared bonus during 2007-08. In 2007-08, the companies, which declared bonus, were 71. Out of 54 companies, only two private sector banks, Bank of Rajasthan (1:5) and South Indian Bank (1:4), declared bonus during 2008-09.

An analyst from the market said, "When the economy is in slowdown, companies become less confident of their ability to service higher number of equity shares. So, they become reluctant to declare bonus issues. This also reflects their nervousness regarding future prospects."

Despite poor performance, corporate India was more liberal to announce the bonus issues in 2008-09. For example, Megh Mayur Infra has declared 20 bonus shares for every share held. Simplex Trading has proposed four bonus shares for every share held.

Twenty three companies have declared 1:1 bonus issues during 2008-09 and nine companies declared bonus 1:2 during the same period. Among others, Opto Circuits (I) (7:10) followed by Bliss GVS Pharma (3:5) declared the highest number of bonus shares.

In 2007-08, 36 companies declared 1:1 bonus issues and 13 companies declared 1:2 bonus issues. Among others, Veer Energy (9:5) and Mediaone Global (5:1) declared the highest number of bonus shares.

In 2008-09, there were two bonus announcements in April, five in May, two companies announced bonus in July, six announced bonus in August, nine in September, 13 announced in October, five in November, seven in December, three announced in January 2009, one announced in February and only one company declared bonus in March. So, the highest number of companies declared bonuses in October, 2008.

Gujarat NRE Coke and Jolly Board are the majors, which declared bonus in October. Gujarat NRE Coke has offered two bonus shares for every five shares held, while Jolly Board is making a 4:1-bonus issue.

An analyst from a rating agency said, "Though the performance of the companies have not by and large deteriorated significantly, in respect of those companies which are eligible to declare bonuses. But looking at the general slowdown in both the domestic and global markets, the companies are taking all steps to remain in liquid state by conserving as much cash as possible. The declaration of bonus will certainly put pressures on the companies' ability to service in large equity after the bonus issues, which companies are trying to avoid at the point of time."

Taking a toll

In the banking sector, only Bank of Rajasthan and South Indian Bank declared bonus

Despite poor performance, corporate India was more liberal to announce the bonus issues

23 companies have declared 1:1 bonus issues and 9 declared bonus 1:2 in 2008-09