The resolution for a dividend was blocked on Thursday at the annual general meeting (AGM) of Unitech, the second-largest real estate firm in India. The shareholders did not approve of the resolution, Unitech told the Bombay Stock Exchange (BSE).
The 40th AGM of the company, deferred by a month, passed all resolutions, except the one for a dividend, Unitech told the BSE. The scrip closed marginally lower at Rs 27.
The company board had proposed a Rs 30 crore payout as dividend. However, the majority of shareholders did not approve. Shareholders felt the company should use the funds for business, given the high interest rate environment, added a source.
An analyst argued this may not be the best time for Unitech to pay a dividend to shareholders as its priority was to reduce debt. Another analyst noted it’s seldom that shareholders block dividends.
“This shows maturing of the shareholders and, key among them, the promoters and hopefully, some FIIs and institutions as well,” said Rajesh Jain, chief executive officer, Pranav Securities. He said Unitech has some big debt and the interest is back-breaking.
Unitech is looking to reduce its debt, currently at Rs 5,300 crore, by Rs 500 crore by the end of this financial year. In the first quarter of FY12, it cut the debt by around Rs 200 crore. Unitech’s debt to equity ratio is currently at 0.4. While the company’s debt has come down considerably from Rs 10,500 crore in December 2008 to Rs 5,300 crore now, it is trying to cut it further.
Unitech is also in the middle of an arbitration regarding a rights issue for its telecom business with Norway’s Telenor. But, analysts said “the realty stock would not take a big hit because of issues dealing with its telecom arm.”
Meanwhile, Unitech managing director Sanjay Chandra, who was in judicial custody for his alleged role in the second generation scandal, has sought an interim bail. The case will come up for hearing in the apex court tomorrow.
