Normal logic suggests that when funds are low... you tighten your belt !
But then, when did normal logic ever fit our Realty tycoons.
In a recent article carried in the Economic times, a number of leading Realty firms that are seriously in debt, have given themselves huge Dividends.
Infact on one hand they are scouting around for funds to lower their debts and on the other hand they are spending it on themselves.
DLF has been in the news a lot, due to the acute financial situation it has been...but that did not stop it from sanctioning huge dividends.
Of course it all makes sense if 75% of the shareholding belongs to the promoters!
READ on.... (the Economic Times- 3rd July12)
But then, when did normal logic ever fit our Realty tycoons.
In a recent article carried in the Economic times, a number of leading Realty firms that are seriously in debt, have given themselves huge Dividends.
Infact on one hand they are scouting around for funds to lower their debts and on the other hand they are spending it on themselves.
DLF has been in the news a lot, due to the acute financial situation it has been...but that did not stop it from sanctioning huge dividends.
Of course it all makes sense if 75% of the shareholding belongs to the promoters!
READ on.... (the Economic Times- 3rd July12)
PROPERTY MARKETListed Realty Cos Dole out Big Dividends
About 26 firms have given out an aggregate dividend of . 722 crore to shareholders
The current crisis in the real estate market has not prevented listed companies in the sector from doling out handsome dividends for the fiscal year 2012 and helping their promoters make a killing even as companies struggled to pare debt.
According to an ET analysis, 26 listed companies — most having a 50% or more promoter holding — recommended an aggregate dividend of . 722 crore during the year. And the country's biggest real estate firm DLF, which has a total debt of . 22,725 crore, made for half the payout at . 339.7 crore. Realty developers like DLF, Godrej Properties, Marathon Nextgen Realty, Phoenix Mills, Sobha Developers, Mahindra Lifespace Developers, Prestige Estates Projects and Puravankara Projects are among developers that have handed out liberal dividends. In all these companies, the promoter holding is more than 50% and in some like DLF, Prestige Estates and Puravankara Projects, it’s more than 75%.
“Most real estate companies are very tight on cash. So, they have to hold on to their share price, especially during times of distress. Paying dividends is one way of doing so as it helps in projecting a good image among the investors,” said G Chokkalingam, executive director and chief investment officer, Centrum Wealth Management.
“This also becomes a tool to hold on to one’s stakes in cases where the promoters have pledged their stakes,” he added.
What’s even more surprising is that most of these companies have decided to reward shareholders at a time when they are seeking funds from external sources to cut their debt.
As on March end, the aggregate net debt of eleven real estate companies stood at . 41,400 crore as against . 41,700 crore a quarter ago, showed a report by brokerage Edelweiss Securities. Although the debt burden has eased marginally since the last quarter, sales volume has not picked up dramatically. However, most of the companies contend that they might not be under severe pressure to repay debt. A sound financial decision for a debt-ridden company would be to conserve cash and use it to reduce liabilities. Minority shareholders also usually prefer this to getting a nominal reward for their investment in the company.
Last year, in one such instance, shareholders of Unitech refused to approve a resolution to pay dividend on equity shares for the fiscal year 2011 at the company’s annual general meeting.
Most of the companies that were contacted for this story did not respond to the emails sent by ET. Among those who did like Peninsula Land and Marathon Nextgen Realty are largely the ones with low debt profiles. “Considering that the real estate sector is a capital-intensive industry, the company has always followed a conservative dividend policy as per which, about 25% of profit is distributed as dividend.
Accordingly, during the period ended March 2012, the company declared a dividend of . 1.1 per share which works out to a 22% payout,” said Mahesh Gupta, group managing director, Ashok Piramal Group that owns Peninsula Land.
About 26 firms have given out an aggregate dividend of . 722 crore to shareholders
The current crisis in the real estate market has not prevented listed companies in the sector from doling out handsome dividends for the fiscal year 2012 and helping their promoters make a killing even as companies struggled to pare debt.
According to an ET analysis, 26 listed companies — most having a 50% or more promoter holding — recommended an aggregate dividend of . 722 crore during the year. And the country's biggest real estate firm DLF, which has a total debt of . 22,725 crore, made for half the payout at . 339.7 crore. Realty developers like DLF, Godrej Properties, Marathon Nextgen Realty, Phoenix Mills, Sobha Developers, Mahindra Lifespace Developers, Prestige Estates Projects and Puravankara Projects are among developers that have handed out liberal dividends. In all these companies, the promoter holding is more than 50% and in some like DLF, Prestige Estates and Puravankara Projects, it’s more than 75%.
“Most real estate companies are very tight on cash. So, they have to hold on to their share price, especially during times of distress. Paying dividends is one way of doing so as it helps in projecting a good image among the investors,” said G Chokkalingam, executive director and chief investment officer, Centrum Wealth Management.
“This also becomes a tool to hold on to one’s stakes in cases where the promoters have pledged their stakes,” he added.
What’s even more surprising is that most of these companies have decided to reward shareholders at a time when they are seeking funds from external sources to cut their debt.
As on March end, the aggregate net debt of eleven real estate companies stood at . 41,400 crore as against . 41,700 crore a quarter ago, showed a report by brokerage Edelweiss Securities. Although the debt burden has eased marginally since the last quarter, sales volume has not picked up dramatically. However, most of the companies contend that they might not be under severe pressure to repay debt. A sound financial decision for a debt-ridden company would be to conserve cash and use it to reduce liabilities. Minority shareholders also usually prefer this to getting a nominal reward for their investment in the company.
Last year, in one such instance, shareholders of Unitech refused to approve a resolution to pay dividend on equity shares for the fiscal year 2011 at the company’s annual general meeting.
Most of the companies that were contacted for this story did not respond to the emails sent by ET. Among those who did like Peninsula Land and Marathon Nextgen Realty are largely the ones with low debt profiles. “Considering that the real estate sector is a capital-intensive industry, the company has always followed a conservative dividend policy as per which, about 25% of profit is distributed as dividend.
Accordingly, during the period ended March 2012, the company declared a dividend of . 1.1 per share which works out to a 22% payout,” said Mahesh Gupta, group managing director, Ashok Piramal Group that owns Peninsula Land.