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Vol
4: Issue No.10 : October, 2004 |
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| Individual investors and shareholders rarely pay attention to consolidated financial statements. Indeed, there is very little evidence that analysts do so either, barring in a few sectors like IT and pharmaceuticals. A sample of 205 companies with consolidated numbers for FY 2004 shows net sales are up by 10 % and net profit by 4 %. For an individual company, the difference between consolidated and standalone, figures is more significant and aggregate numbers don’t give the complete picture. The difference in sales can be as high as 25-30 % while profits can be higher by 15-30 % or lower by 20-30 %. But there are some companies where the differences are much higher. Also, the difference in standalone and consolidated results is more marked in 2004, compared to the previous year when consolidated sales were higher by 7 % but profits were stagnant. Consolidated numbers reflect the impact of the performance of subsidiaries, joint ventures and even investments in associate companies. Thus, the performance of investments in outside companies is reflected in the holding company’s performance. Bonuses
given by India Inc have gotten bigger than ever. In many cases,
companies are also rewarding their top performers with a percentage
of earnings (read profit or savings in case of outsourcing) running
into crores in cash. According to Venkat Sastry, Associate Director
of head-hunting firm Stanton Chase India, “CEOs are no more a
salaried class. In the new economy sectors, a CEO is in a business
contract with the board and shares in the profits of the company
like shareholder”. Of late, CEOs in fast growing companies have
been signing an annual MoU with the board specifying their targets
and rewards. Though the concept of one-time reward is not unique
to the new economy sectors, old economy companies are still more
conservative.
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| The Securities and Exchange Board of India (SEBI) will now govern the issue of Employees Stock Option Scheme (ESOP) by a listed company in the knowledge-based sectors, the RBI said today. This issue of ESOP will be according to the SEBI (Employees Stock Option and Stock purchase Scheme) Guidelines, 1999, RBI said in a circular to all banks, which are allowed to deal in foreign exchange. However, issue of ESOP by an unlisted company in the sector would be governed by the Government of India guidelines. RBI's approval would not be required from now onwards for purchase of foreign securities under the ADR or GDR linked ESOP scheme up to US dollars aggregating $50,000, said the circular. The remittance can also be made under the scheme in a block of five calendar years. The central bank also
said today that listed Indian companies might allot shares to
their employees who are citizens of Bangladesh and Sri Lanka under
ESOP.
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The ministry for company affairs has given three months to the professional institutes and trade/industry bodies to give feedback on the concept paper before going in for a new Companies Act. After that, the ministry plans to appoint a committee to look into the recommendations made. Minister
of state (Independent Charge) for company affairs Prem Chand
Gupta while addressing the media at the Institute of Chartered
Accountants of India (ICAI), said that the committee will involve
professional bodies like ICAI, ICSI, ICWAI, banks, FIs, chambers
of commerce and Sebi. However, he was unable to give a time
frame for this to be completed.
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Corporate India has been rewarding its shareholders in a big way. The dividend payout ratio of India’s top 200 companies has touched a 10-year high of 35 % in FY 2003 from 19 % in 1994-95. What is more significant is that the payouts have grown at a rate faster than earnings. The only exception to this dividend payout trend is the consumer staples and information technology sector. In both these cases, the dividend payout ratios have dropped from their FY 1995 levels. On the other hand, in the case of consumer durables, the payout increased rapidly till FY 2001, but thereafter have dropped significantly. As expected, the sharpest increase has been in the case of energy sector. The dividend payout ratio for energy companies increased from a low of 8 % in FY 1995 to a whopping 40 % in FY2003. According to a Morgan Stanley study much of this increase in dividend payout ratios has happened since FY 1999, when dividend related tax laws were changed. Dividends were earlier taxed at the marginal rate in the hands of the investor.
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Institute of Company Secretaries of India (ICSI) has asked governments of various countries to press for inclusion of a new head for corporate governance and company secretarial services under the services sectoral classification list of the WTO. "We have, through a multi-national platform, approached governments of different countries to press for new head for corporate governance and company secretarial services under the services sectoral classification list of the WTO," ICSI president Mahesh Athavale said at the national convention of ICSI here. ICSI vision plan adopted by the Institute charted out the road map for actions and future strategies for the profession of company secretaries, he said.
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| © 2001 Academy of Corporate Governance |
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