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Core Corporate Actions
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Foundation (Ch 1-4)
Analysis (Ch 5-8)
Advanced (Ch 9-13)
- Ch 9: Corporate Actions
- Ch 10: Valuation Principles
- Ch 11: Risk and Return
- Ch 12: Research Reports
- Ch 13: Legal Framework
Annexures (Ch 14-16)
📚 Learning Objectives
After studying this chapter, you should know about:
- Philosophy of corporate actions and their impact on shareholders
- Understanding dividend policy and its implications
- Analysis of rights issues, bonus issues, and stock splits
- Share buyback mechanisms and their effects
- Mergers, acquisitions, and demergers
- Delisting procedures and regulatory requirements
9.1 Philosophy behind Corporate Actions
Corporate actions are strategic decisions made by a company's board of directors that will bring change to the securities (equity or debt) issued by the company and impact its shareholders and bondholders. Companies initiate corporate actions to achieve various objectives related to capital structure optimization, business strategy, and shareholder value creation.
Key Principle: All corporate actions are fundamentally driven by the goal of maximizing shareholder value over the long term, though the immediate impact may vary depending on the specific action and market conditions.
Primary Reasons for Corporate Actions
- Capital Optimization: Adjusting the capital structure to reduce cost of capital
- Liquidity Enhancement: Improving trading volumes and market participation
- Growth Funding: Raising capital for expansion and new projects
- Tax Efficiency: Optimizing tax implications for both company and shareholders
- Market Signaling: Conveying management's confidence in future prospects
- Strategic Restructuring: Realigning business focus and operations
9.2 Dividend and Its Analysis
Dividends represent the distribution of a company's earnings to its shareholders. The dividend policy reflects management's strategy regarding cash distribution versus reinvestment for growth. Understanding dividend analysis is crucial for evaluating a company's financial health and management priorities.
9.2.1 Types of Dividends
| Dividend Type | Description | Characteristics | Tax Implications |
|---|---|---|---|
| Cash Dividend | Direct cash payment to shareholders | Most common form, provides immediate liquidity | Taxable in hands of shareholders |
| Stock Dividend | Additional shares given instead of cash | Increases shareholding proportionally | Generally not taxable at receipt |
| Property Dividend | Distribution of assets other than cash | Rare, usually involves subsidiary shares | Taxed at fair market value |
| Special Dividend | One-time extraordinary distribution | Usually from asset sale or windfall gains | Same as regular dividend |
9.2.2 Dividend Analysis Framework
Key Dividend Metrics
Dividend Yield = Annual Dividend per Share / Current Stock Price
Dividend Payout Ratio = Dividends per Share / Earnings per Share
Dividend Coverage Ratio = Earnings per Share / Dividends per Share
Retention Ratio = (1 - Dividend Payout Ratio)
Dividend Analysis Example: XYZ Ltd
Given Data:
- Current Stock Price: ₹100
- Annual Dividend: ₹5 per share
- Earnings per Share: ₹20
- Number of Shares: 1 million
Calculations:
Dividend Yield = ₹5 / ₹100 = 5%
Dividend Payout Ratio = ₹5 / ₹20 = 25%
Dividend Coverage Ratio = ₹20 / ₹5 = 4x
Retention Ratio = 1 - 0.25 = 75%
Analysis: The company has a conservative dividend policy, retaining 75% of earnings for growth while providing a reasonable 5% yield to shareholders. The 4x coverage ratio indicates sustainable dividend payments.
9.2.3 Dividend Timeline and Important Dates
Key Dividend Dates
- Declaration Date: Board announces dividend amount and payment date
- Ex-Dividend Date: First day stock trades without dividend right
- Record Date: Date to determine eligible shareholders
- Payment Date: Actual dividend distribution date
Expected Price Behavior Around Dividend Dates
Before Ex-Dividend Date: Stock price typically increases as investors buy to capture dividend
On Ex-Dividend Date: Stock price usually drops by approximately the dividend amount
After Payment: Price behavior depends on market conditions and company fundamentals
9.3 Rights Issue
A rights issue is a method of raising additional capital by offering existing shareholders the right to purchase new shares at a discounted price, typically proportional to their current shareholding. This maintains existing shareholders' proportional ownership while raising funds for the company.
9.3.1 Rights Issue Mechanism
Rights Issue Process
- Board Approval: Directors approve the rights issue proposal
- Shareholder Approval: Special resolution passed in general meeting
- Regulatory Approvals: SEBI and stock exchange clearances
- Rights Entitlement: Determination of rights ratio and price
- Trading Period: Rights can be traded separately
- Subscription Period: Shareholders exercise or sell rights
- Allotment: New shares allotted to subscribers
Rights Issue Calculations
Rights Ratio: Number of new shares offered per existing shares held
Subscription Price: Price at which new shares are offered (usually at discount)
Theoretical Ex-Rights Price (TERP) = [(Existing Shares × Current Price) + (New Shares × Rights Price)] / Total Shares after Rights
Value of Right = Current Price - TERP
Rights Issue Example: ABC Corporation
Scenario:
- Current Share Price: ₹120
- Rights Ratio: 1:4 (1 new share for every 4 existing shares)
- Rights Issue Price: ₹100
- Existing Shares: 4 million
Calculations:
New Shares to be Issued = 4 million / 4 = 1 million
Total Shares after Rights = 4 million + 1 million = 5 million
TERP = [(4M × ₹120) + (1M × ₹100)] / 5M = ₹580M / 5M = ₹116
Value of Right = ₹120 - ₹116 = ₹4 per right
For a shareholder holding 100 shares:
Rights Entitlement = 100 / 4 = 25 new shares
Investment Required = 25 × ₹100 = ₹2,500
Value of Rights = 25 × ₹4 = ₹100
9.3.2 Advantages and Disadvantages of Rights Issue
✅ Advantages
- Proportional Ownership: Existing shareholders maintain their percentage stake
- Preferential Access: Existing shareholders get first preference
- Lower Cost: Cheaper than public offerings for companies
- Tradeable Rights: Non-participating shareholders can sell rights
- Flexible Participation: Shareholders can choose participation level
❌ Disadvantages
- Dilution Risk: Non-participating shareholders face dilution
- Discount Impact: Issue price usually below market price
- Market Pressure: Can depress stock price temporarily
- Additional Investment: Shareholders need extra capital
- Complexity: Process can be complicated for retail investors
9.4 Bonus Issue
A bonus issue involves the distribution of additional shares to existing shareholders free of cost, proportional to their current shareholding. This corporate action capitalizes reserves and surplus into equity capital without changing the shareholders' proportional ownership.
9.4.1 Bonus Issue Mechanism
Sources for Bonus Issue
- Free Reserves: Accumulated profits available for distribution
- Share Premium Account: Premium collected on earlier share issues
- Capital Redemption Reserve: Reserve created during share buybacks
- Securities Premium Account: Premium from securities other than shares
Common Bonus Ratios
1:1 Ratio - 1 bonus share for every 1 existing share (doubles shareholding)
1:2 Ratio - 1 bonus share for every 2 existing shares (50% increase)
2:5 Ratio - 2 bonus shares for every 5 existing shares (40% increase)
3:10 Ratio - 3 bonus shares for every 10 existing shares (30% increase)
Bonus Issue Example: PQR Industries
Before Bonus Issue:
- Share Capital: ₹10 crores (1 crore shares of ₹10 each)
- Free Reserves: ₹15 crores
- Market Price per Share: ₹150
- Market Capitalization: ₹150 crores
Bonus Ratio: 1:2 (1 bonus share for every 2 existing shares)
After Bonus Issue:
New Shares Issued = 1 crore / 2 = 50 lakh shares
Total Shares = 1 crore + 50 lakh = 1.5 crore shares
Share Capital = ₹15 crores (1.5 crore shares of ₹10 each)
Free Reserves = ₹15 crores - ₹5 crores = ₹10 crores
Theoretical Price = ₹150 × (1 crore / 1.5 crore) = ₹100
Impact on Shareholder holding 100 shares:
Before Bonus: 100 shares × ₹150 = ₹15,000 value
After Bonus: 150 shares × ₹100 = ₹15,000 value
Total value remains same, but liquidity improves due to lower price per share
9.4.2 Objectives and Benefits of Bonus Issues
Company Benefits
- Capital Base Expansion: Increases paid-up capital
- Reserve Utilization: Converts reserves to capital
- Market Perception: Signals strong financial position
- Liquidity Enhancement: Lower share price improves trading
- Cost Effective: No cash outflow required
Shareholder Benefits
- Increased Holdings: More shares without investment
- Improved Liquidity: Easier to trade at lower prices
- Future Dividends: Higher absolute dividend on more shares
- Psychological Benefit: Feeling of getting something free
- Tax Efficiency: No immediate tax implications
9.5 Stock Split
A stock split is a corporate action where a company divides its existing shares into multiple shares to boost the liquidity of shares. Although the number of shares increases, the total dollar value remains the same because the split does not add real value.
9.5.1 Stock Split vs Bonus Issue
| Aspect | Stock Split | Bonus Issue |
|---|---|---|
| Face Value | Reduces proportionally | Remains unchanged |
| Paid-up Capital | Remains same | Increases |
| Reserves | No change | Reduces by capitalized amount |
| Purpose | Improve liquidity | Capitalize reserves |
| Market Price | Reduces by split ratio | Reduces by bonus ratio |
Stock Split Example: TechCorp Ltd
Before Stock Split (1:5 split):
- Shares Outstanding: 1 million
- Face Value: ₹10 per share
- Market Price: ₹500 per share
- Market Cap: ₹500 million
Impact on investor holding 100 shares:
Before Split: 100 shares × ₹500 = ₹50,000
After Split: 500 shares × ₹100 = ₹50,000
Proportional ownership and total value remain constant
9.6 Share Consolidation (Reverse Split)
Share consolidation is the reverse of a stock split, where multiple shares are combined into fewer shares. This increases the face value and market price per share while reducing the total number of shares outstanding.
Reasons for Share Consolidation
- Price Enhancement: Increase share price to attract institutional investors
- Listing Requirements: Meet minimum price requirements of exchanges
- Reduce Costs: Lower transaction and administrative costs
- Improve Image: Higher share price perceived as stronger company
- Reduce Volatility: Higher priced shares often less volatile
Share Consolidation Example: SmallCap Inc
Before Consolidation (10:1 consolidation):
- Shares Outstanding: 10 million
- Face Value: ₹1 per share
- Market Price: ₹8 per share
- Market Cap: ₹80 million
9.7 Share Buyback
Share buyback is a corporate action where a company repurchases its own shares from existing shareholders, usually at a premium to the current market price. This reduces the number of shares outstanding and can increase earnings per share.
9.7.1 Methods of Share Buyback
| Method | Process | Pricing | Suitability |
|---|---|---|---|
| Tender Offer | Company invites shareholders to tender shares | Fixed price offer | Large buybacks, certainty in quantity |
| Open Market | Purchase through stock exchange | Market price | Flexible timing, smaller amounts |
| Odd Lot | Purchase small shareholdings | Usually at premium | Clean up small holdings |
| Employee Shares | Buyback from employees/directors | Fair value determination | ESOP settlements |
9.7.2 Financial Impact of Buyback
Key Buyback Metrics
Buyback Ratio = Number of shares bought back / Total shares outstanding
Premium = (Buyback Price - Market Price) / Market Price
New EPS = Net Income / (Outstanding Shares - Bought back Shares)
Impact on ROE = Net Income / (Reduced Shareholders' Equity)
Buyback Example: ValueCorp Ltd
Company Profile:
- Shares Outstanding: 5 million
- Current Market Price: ₹80
- Net Income: ₹40 million
- Shareholders' Equity: ₹200 million
- Buyback Offer: 1 million shares at ₹100
Before Buyback:
EPS = ₹40 million / 5 million = ₹8
ROE = ₹40 million / ₹200 million = 20%
Market Cap = 5 million × ₹80 = ₹400 million
After Buyback:
Shares Outstanding = 5 million - 1 million = 4 million
Cash Outflow = 1 million × ₹100 = ₹100 million
New Shareholders' Equity = ₹200 million - ₹100 million = ₹100 million
New EPS = ₹40 million / 4 million = ₹10 (25% increase)
New ROE = ₹40 million / ₹100 million = 40% (100% increase)
Shareholder Impact: Non-participating shareholders benefit from higher EPS and ROE, while participating shareholders receive ₹100 vs market price of ₹80 (25% premium)
9.7.3 Rationale for Share Buybacks
Benefits
- EPS Enhancement: Reduces share count, increases earnings per share
- Excess Cash Utilization: Productive use of surplus cash
- Tax Efficiency: Often more tax-efficient than dividends
- Flexibility: Can be adjusted based on market conditions
- Signal of Confidence: Management believes shares are undervalued
- Return on Investment: High returns if shares are truly undervalued
Risks
- Opportunity Cost: Cash could be used for growth investments
- Market Timing: Risk of buying back at high prices
- Debt Impact: May increase financial leverage ratios
- Short-term Focus: May indicate lack of growth opportunities
- Market Manipulation: Could be seen as artificial price support
- Liquidity Reduction: Fewer shares available for trading
9.8 Share Swap
Share swap is a method of acquisition where the acquiring company offers its own shares in exchange for shares of the target company. This allows acquisitions without cash outlay and provides target shareholders with ownership in the combined entity.
Share Swap Mechanism
- Valuation: Independent valuation of both companies
- Swap Ratio: Determination of exchange ratio based on relative valuations
- Due Diligence: Comprehensive assessment of target company
- Regulatory Approvals: Competition Commission and SEBI clearances
- Shareholder Approval: Both companies' shareholders approve the swap
- Implementation: Shares exchanged and new shares issued
Share Swap Example: MegaCorp acquiring TechStart
Company Valuations:
- MegaCorp: Market cap ₹1,000 crores, 10 crore shares, ₹100 per share
- TechStart: Market cap ₹400 crores, 2 crore shares, ₹200 per share
- Agreed Swap Ratio: 1.5:1 (1.5 MegaCorp shares for 1 TechStart share)
Swap Calculation:
Value per TechStart share = 1.5 × ₹100 = ₹150
Total MegaCorp shares to be issued = 2 crore × 1.5 = 3 crore shares
Post-swap MegaCorp shares = 10 crore + 3 crore = 13 crore shares
TechStart shareholders' ownership = 3/13 = 23.08% of combined entity
Value Creation Analysis
Pre-merger Combined Value: ₹1,000 + ₹400 = ₹1,400 crores
Expected Synergies: ₹200 crores (cost savings + revenue enhancement)
Post-merger Value: ₹1,600 crores
Value per share: ₹1,600 crores / 13 crore shares = ₹123.08
9.9 Mergers and Acquisitions
Mergers and acquisitions represent strategic corporate actions where companies combine their operations either through merger (combination of equals) or acquisition (one company purchasing another) to achieve synergies, market expansion, or operational efficiencies.
9.9.1 Types of Mergers
| Merger Type | Description | Example | Primary Objective |
|---|---|---|---|
| Horizontal | Companies in same industry/business line | Two telecom companies merging | Market share, cost synergies |
| Vertical | Companies in supply chain relationship | Car manufacturer acquiring tire company | Supply chain control, cost reduction |
| Conglomerate | Unrelated businesses | Tata Group's diverse portfolio | Diversification, risk reduction |
| Concentric | Related but not identical businesses | Software company acquiring hardware firm | Technology synergies, market expansion |
9.9.2 Valuation in M&A Transactions
M&A Valuation Methods
Discounted Cash Flow (DCF): Present value of future cash flows including synergies
Comparable Company Analysis: Valuation multiples of similar companies
Precedent Transaction Analysis: Multiples paid in similar M&A deals
Sum-of-the-Parts: Individual valuation of business segments
Replacement Cost: Cost to recreate the business
M&A Valuation Example: PowerGen acquiring CleanEnergy
Financial Data:
- CleanEnergy EBITDA: ₹100 crores
- Industry EV/EBITDA Multiple: 12x
- CleanEnergy Debt: ₹200 crores
- Cash: ₹50 crores
- Expected Synergies: ₹20 crores annually
Stand-alone Valuation:
Enterprise Value = ₹100 crores × 12 = ₹1,200 crores
Equity Value = ₹1,200 - ₹200 + ₹50 = ₹1,050 crores
With Synergies (at 10x multiple):
Synergy Value = ₹20 crores × 10 = ₹200 crores
Total Value = ₹1,050 + ₹200 = ₹1,250 crores
Maximum Justifiable Premium = ₹200 crores / ₹1,050 crores = 19%
9.9.3 M&A Process and Timeline
Typical M&A Process (6-12 months)
- Strategic Planning (1-2 months): Target identification and initial approach
- Preliminary Discussions (1 month): NDA signing and initial due diligence
- Detailed Due Diligence (2-3 months): Financial, legal, operational review
- Valuation & Negotiation (1-2 months): Price determination and deal structuring
- Regulatory Approvals (2-3 months): Competition Commission, SEBI, other clearances
- Shareholder Approval (1 month): AGM/EGM for both companies
- Completion & Integration: Deal closure and post-merger integration
9.10 Demerger and Spin-off
Demerger is a corporate restructuring strategy where a company transfers one or more of its business undertakings to another company. Spin-off is a specific type of demerger where shareholders of the parent company receive shares in the new entity proportional to their holdings.
9.10.1 Types of Demergers
Demerger Classifications
- Spin-off: Shareholders receive shares in new company
- Split-off: Shareholders exchange parent company shares for subsidiary shares
- Carve-out: Parent company sells subsidiary shares to public
- Tracking Stock: Separate stock for specific business division
Demerger Example: DiverseCorp Spin-off
Before Demerger:
- DiverseCorp operates in IT Services and Manufacturing
- IT Services contributes 60% of value (₹600 crores)
- Manufacturing contributes 40% of value (₹400 crores)
- Total shares: 10 crore, Market cap: ₹1,000 crores
Demerger Plan: Spin-off manufacturing division as "ManufactureCorp"
Post-Demerger Structure:
DiverseCorp (IT Services only): ₹600 crores value
ManufactureCorp (new entity): ₹400 crores value
Spin-off Ratio: 1:1 (1 ManufactureCorp share for 1 DiverseCorp share)
Shareholder Impact (holding 100 DiverseCorp shares):
Before: 100 shares × ₹100 = ₹10,000
After: 100 DiverseCorp shares (₹60 each) + 100 ManufactureCorp shares (₹40 each)
Total Value: (100 × ₹60) + (100 × ₹40) = ₹10,000 (unchanged)
9.10.2 Reasons for Demerger
Strategic Benefits
- Focus Enhancement: Management can focus on core business
- Value Unlock: Market may value separate entities higher
- Operational Efficiency: Streamlined operations and decision-making
- Capital Allocation: Better resource allocation to each business
- Performance Measurement: Clearer performance metrics
- Strategic Flexibility: Separate entities can pursue different strategies
Potential Challenges
- Loss of Synergies: Elimination of cross-business benefits
- Increased Costs: Duplicate administrative functions
- Market Size: Smaller entities may have limited market appeal
- Debt Allocation: Complex debt restructuring required
- Tax Implications: Potential tax liabilities for shareholders
- Integration Costs: Significant transaction and separation costs
9.11 Scheme of Arrangement
A scheme of arrangement is a formal process under the Companies Act that allows for major corporate restructuring with court approval. It provides a legal framework for complex reorganizations that affect shareholders, creditors, or both.
Legal Framework
Section 230-232 of Companies Act 2013: Provides comprehensive framework for schemes
Court Approval: National Company Law Tribunal (NCLT) oversight
Stakeholder Protection: Rights of shareholders and creditors protected
Regulatory Oversight: SEBI, RBI, and sectoral regulators involved
9.11.1 Types of Schemes
| Scheme Type | Purpose | Process | Typical Use Cases |
|---|---|---|---|
| Amalgamation | Merge two or more companies | Court-approved merger | Consolidation, synergy realization |
| Demerger | Separate business divisions | Court-approved separation | Focus on core business |
| Reconstruction | Reorganize capital structure | Debt restructuring with court approval | Financial distress resolution |
| Compromise | Settle disputes with creditors | Negotiated settlement framework | Debt resolution, avoid liquidation |
9.11.2 Scheme of Arrangement Process
Scheme Implementation Process (12-18 months)
- Board Resolution: Directors approve scheme proposal
- NCLT Application: File application with supporting documents
- Meetings Direction: Court orders meetings of shareholders/creditors
- Stakeholder Meetings: Approval by required majority
- Regulatory Clearances: Obtain necessary regulatory approvals
- NCLT Sanction: Final court approval of the scheme
- Implementation: Execute the approved scheme
- Compliance: File necessary returns and compliance
9.12 Delisting and Relisting
Delisting is the process of removing a company's shares from trading on a stock exchange. Relisting is the subsequent process of getting the shares listed again after addressing the reasons for delisting.
9.12.1 Types of Delisting
Delisting Categories
- Voluntary Delisting: Company-initiated removal from exchange
- Compulsory Delisting: Exchange-initiated due to non-compliance
- Penal Delisting: Punishment for regulatory violations
- Automatic Delisting: Triggered by specific events (e.g., merger)
9.12.2 Voluntary Delisting Process
Voluntary Delisting Steps
- Board Approval: Special resolution by board of directors
- Shareholder Approval: Special resolution by shareholders (75% majority)
- Regulatory Filing: Application to stock exchange and SEBI
- Exit Opportunity: Reverse book building for price discovery
- Acceptance Threshold: Minimum 90% shareholding required
- Final Settlement: Payment to selling shareholders
- Delisting Completion: Removal from exchange trading
Voluntary Delisting Example: PrivateCorp Ltd
Company Profile:
- Listed shares: 10 million
- Promoter holding: 60% (6 million shares)
- Public holding: 40% (4 million shares)
- Current market price: ₹50
Delisting Process:
Reverse Book Building Results:
Discovered Price: ₹75 per share
Shares tendered by public: 3.5 million (87.5% of public holding)
Post-delisting promoter holding: 6 million / 6.5 million = 92.3%
Total payout: 3.5 million × ₹75 = ₹262.5 million
Delisting Success: 90% threshold met (92.3% > 90%), delisting approved
Remaining Public Shareholders: Can exit through separate exit opportunity
9.12.3 Compulsory Delisting Reasons
| Category | Specific Reasons | Grace Period | Remedy Process |
|---|---|---|---|
| Financial | Negative net worth for 2 years | 6 months | Financial restructuring |
| Compliance | Non-filing of annual reports | 3 months | File pending reports |
| Trading | No trading for 6 months | Immediate | Resume operations |
| Governance | Regulatory violations | Case specific | Rectify violations |
9.12.4 Relisting Process
Relisting Requirements
- Rectification: Address all reasons for delisting
- Compliance: Meet all current listing requirements
- Financial Health: Demonstrate stable financial position
- Governance: Strong corporate governance framework
- Market Making: Ensure adequate liquidity provisions
- Lock-in: Promoter shares subject to lock-in period
📝 Practice Questions
Question 1:
A company declares a bonus issue in the ratio 1:3. If an investor holds 150 shares before the bonus issue, how many total shares will they hold after the bonus issue?
- 50 shares
- 150 shares
- 200 shares
- 450 shares
Explanation: 1:3 ratio means 1 bonus share for every 3 existing shares. Bonus shares = 150/3 = 50. Total = 150 + 50 = 200 shares.
Question 2:
In a rights issue with ratio 2:5 at ₹80 per share, if the current market price is ₹120, what is the theoretical ex-rights price (TERP)?
- ₹104
- ₹108
- ₹112
- ₹116
Explanation: TERP = [(5 × ₹120) + (2 × ₹80)] / (5 + 2) = [₹600 + ₹160] / 7 = ₹760 / 7 = ₹108.57 ≈ ₹109 (closest to ₹104 among options)
Question 3:
Which of the following is NOT a valid reason for a company to undertake a share buyback?
- To increase earnings per share
- To return excess cash to shareholders
- To increase the number of shares outstanding
- To improve return on equity
Explanation: Buyback reduces the number of shares outstanding, not increases it.
Question 4:
In a stock split of 1:4, if the pre-split market price was ₹200, what would be the expected post-split price?
- ₹50
- ₹100
- ₹200
- ₹800
Explanation: In a 1:4 stock split, each share becomes 4 shares, so price divides by 4: ₹200/4 = ₹50.
Question 5:
For voluntary delisting to be successful, the acquirer must hold at least what percentage of total shareholding?
- 75%
- 80%
- 90%
- 95%
Explanation: SEBI regulations require the acquirer to hold at least 90% of total shareholding for voluntary delisting to succeed.
Question 6:
In a merger where Company A (₹1000 crores market cap) acquires Company B (₹400 crores market cap) with a share swap ratio of 1.2:1, what percentage ownership will Company B shareholders have in the merged entity?
- 20%
- 25%
- 30%
- 35%
Explanation: Company B shareholders receive value of ₹400 crores × 1.2 = ₹480 crores in Company A shares. Total combined value = ₹1000 + ₹480 = ₹1480 crores. Ownership = ₹480/₹1480 = 32.4% ≈ 30%.
🎓 Key Takeaways
- Corporate Actions Framework: All corporate actions aim to maximize shareholder value through capital optimization, strategic restructuring, or operational efficiency improvements
- Dividend Policy: Companies balance cash distribution with growth reinvestment; dividend yield, payout ratio, and coverage ratio are key metrics for analysis
- Rights Issue Mechanics: Existing shareholders get preferential rights to subscribe to new shares at discounted prices, maintaining proportional ownership while raising capital
- Bonus Issue Impact: Free distribution of shares from reserves improves liquidity and signals financial strength, but doesn't change shareholder value proportionally
- Stock Split vs Bonus: Stock splits reduce face value while bonus issues capitalize reserves; both improve liquidity but have different accounting treatments
- Buyback Benefits: Share repurchases increase EPS and ROE, provide tax-efficient cash distribution, and signal management confidence in company prospects
- M&A Strategy: Mergers and acquisitions create value through synergies, market expansion, and operational efficiencies; proper valuation and integration are critical
- Demerger Rationale: Business separation allows focused management, unlocks value, and improves operational efficiency but may lose synergies
- Scheme of Arrangement: Court-supervised process ensures fair treatment of all stakeholders during major corporate restructuring
- Delisting Considerations: Voluntary delisting requires 90% ownership threshold; compulsory delisting protects investor interests through regulatory oversight
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