Fast moving consumer goods major Hindustan Lever Limited (HLL) is weighing the option of issuing bonus debentures by drawing upon the general reserves of the company.
The total funds outflow on account of the issue is expected to be Rs 1,455 crore. The debentures would carry an interest rate of 9 per cent per annum, payable annually.
The company has notified stock exchanges that its board will meet on October 16 to consider the scheme formulated under section 391 to 394 of the Companies Act.
According to a press release issued by the company, debentures with a face value of Rs 6 each will be issued and allotted to existing members of the company by way of bonus debentures in the ratio of one fully paid debenture of Rs 6 each for every Re 1 equity share held in the company on a record date to be fixed by the board after the scheme is sanctioned by the Bombay High Court.
"Such issue and allotment of debenture would be considered as `deemed dividend' under the provision of Income Tax Act and the company would bear and pay, in addition, dividend distribution tax at 10.2 per cent on the said issue of bonus debentures from the general reserves. Thus a total amount of Rs 1,455 crore would be utilised from general reserves," the release said. The investment cost of debentures at the hands of the shareholders would be the face value of the debentures.
The debentures would be secured and redeemed at par in two equal instalments on the second and third anniversary of the issue.
