What are Bonus debentures. Heard of them?
Here is an intersting example on Bonus debentures. I believe in INDIA, HLL is the only company offering these Bonus Debentures. How they will help th ecompany?
How could this entire exercise help the company?
This exercise will help the company improve its return on equity and economic value added.
As there is no immediate cash outflow, this debenture issue would not impair the company’s ability to execute any acquisitions. It would still be able to utilize its excess cash over the next 2-3 years.
This could also help the company get exemption on tax on interest payable on the debentures from the second and the third year.
This may also be one way of offering "bonus'' without increasing the equity capital.
The scheme will also enhance the efficiency of the balance sheet in the context of excess cash carried for several years. The issue is expected to result in a book transfer of Rs 1,320 crore from general reserves to 'secured loans'.
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