Last year, the company paid 50% dividend and 10% bonus shares. This year, we were expecting good payout, at least to the extent of last year's payout. Many other sugar mills paid higher dividend and bonuses to their shareholders as compared to last year like JDW Sugar, Hussain Sugar and Shahtaj Sugar etc.
But we were quite shocked, when the management announced only 30% dividend in spite of record bumper profits. It is interesting to note that the company got cash of about Rs 22 crores on account of 100% right shares at a huge premium of Rs 30.
Now the break-up value of the company is more than Rs 90/- and basic earning per share is Rs 23. But unexpectedly, the management deprived the shareholders of good dividend and bonus by announcing a meagre dividend. The share value of the company has dropped to Rs 75 from Rs 92 in just one week.
Unfortunately, there is no compulsion by law under which the companies will be bound to distribute a good portion of their net profits. These days SECP has appointed a Review Commission for necessary amendments in the law. The commission is requested to make necessary amendments in the law through which the companies could be bound to distribute 40% of their net profits.
It is worth mentioning that in 1999 a law was introduced and all the companies were bound to distribute 40% of their net profits to their shareholders.