Castrol is back on the floors!
Castrol is back today and right into the limelight! Trading in the shares of Castrol was suspended since 26th Feb’14 mainly to adjust the company’s capital reduction scheme. And with the carried out, the stock is back on the floors today with a big bang, up 3.5% at Rs.299.
The company set a new benchmark by introducing an excellent way to distribute its cash, a different kind of a bonus to its shareholders. It announced a reduction in its share price from Rs.10 to Rs.5 and instead of adjusting this into the share capital, the company, in a first of its kind move, is returning the remaining Rs.5 to its shareholders and reducing the share capital. Post this offer now, the share capital of Castrol stands reduced at Rs 247.28 crore from Rs.494.60 crore with no change in shareholding pattern and face value is at Rs.5/share. Shareholders were also exempted from any tax liability.
This is a fantastic way to return excess cash to the shareholders, without bloating up the share capital through a bonus issue. Though the fact stands that promoters would stand to benefit the most – as they hold 71% stake and of this cash distribution of Rs.247 crore, they will get Rs.176 crore. Many have called this as a very smart way to transfer the excess cash/reserves to promoters and that too, tax free.