There was a scheme of arrangement in Britannia which involved issuing bonus debentures to shareholders with a face value of Rs 170 and a annual coupon of 8.25% redeemable at the end of 36 months.
I will not get into finer details of this transaction as there is a nice post put out by Prof Bakshi whose link I have enclosed below
http://fundooprofessor.wordpress.com/2010/03/15/britannias-bonds-are-tastier-than-its-cookies/
I had a very small miniscule position in this special situation and the record date for this transaction was March 9th 2010.
Now I come to the interesting part and the reason for this post. The bonds got listed today on the exchanges and lo and behold they got traded as high as Rs 177 on the NSE.
This one completely beats me. The guy who bought it at Rs 177 will make a compounded annualised return of 6.69% on this bond over a three year tenure without factoring in brokerage costs. HDFC Bank is currently offering 8% for a 3 year fixed deposit. Though one must admit it doesnt offer the thrill of sitting in front of a trading terminal and experiencing the dopamine kicking in.
No wonder they say beauty lies in the eyes of the beholder.
Thursday, April 1, 2010
Britannia - Bonus Debentures
Subscribe to:
Post Comments (Atom)
5 comments:
Hi Ninad,
I too had a small position.
Could you tell me what are the tax implications in such a situation?
I bought the securities about 2 months back at about Rs. 1600 per share. Assuming I sell the shares as well as the debentures right now am I liable to pay any tax? And how exactly will the tax be calculated? Will my cost of acquistion be 1430 (1600-170)? What rates of tax apply?
I know I am asking too many questions. But it would be very helpful for me (and the others :)) if you could share some gyan on this aspect of a special situation
thanks
Ninad,
The annual coupon is 8.5 %.
//
Ankur
Hi Ninad,
I was wrong in my previous comment. The annual coupon is 8.25%. The original scheme stated that the interest would not exceed 8.5% per annum.
I assumed the coupon to be 8.5% which was incorrect.
//
Ankur
Hi Ankur
Yeah the coupon is 8.25% which is the announcement that they made on the exchanges.
Cheers
Ninad
Hi Amit
I m really not a tax expert and too be honest one of my weak areas.
The debenture is been considered as deemed dividend and from my understanding ther company bears dividend distribution tax so it is tax free in the hands of the investor. The coupon payment in the subsequent years would however be taxable.
However the loss on the principal amount will not be allowed to be taken as trading loss or will be subjected to the rules that govern dividend stripping.
Having stated all of this, i would suggest that pls take the relevant opinion of your chartered accountant.
Cheers
Ninad
Post a Comment