Assignment Exercise 1: Apar Industries Ltd declares 40% dividend (Dividend per share Rs.4.00) on 27 September 2012.

Answer the following questions: Record date Book Closure date Ex-Dividend date Theoretical EX-Dividend Price Ex-Dividend Price Price Before Announcement of Dividend EPS BOOK Value Per share ROE (%) Payout ratio Growth rate Dividend Yield Ke: PV of Dividends Model Beta Risk-free rate Risk-Premium Ke with CAPM 8-11-2012 9-11-2012 2-11-2012 168.55 (deducting dividend from Nov 1 closing price) 165.65 (as on 2 Nov 2012) 138.25 (as on 26 Sept 2012) 21.44 130.23 16.46% (EPS/book value) 18.66% (dividend/EPS) 13.39% (1-payout ratio)*ROE 2.23% (dividend/CMP) 15.62% (growth rate + dividend yield) 1.0 (CRISIL Research) 8% 7% 15% (Rf + Rp)

Apar Ind fixes book closure for final dividend & AGM from Nov 11 to Nov 091 What are your observations on Price Sensitivity of the Stock with reference to Dividend Announcements? Apar Industries announced dividend of Rs 4 on 27 Sept 2012. The CMP of the stock on that date was Rs. 140. Post the announcement of dividend, there has been a rise in the price of the stock till the exdividend date. Mr. X has Purchased Shares of Apar on 3rd April 2009 and sold the shares at Ex-Dividend Price what is his realized rate of return? Apar Industries as on 3-April-2009. Price = Rs. 79.30 Declared Dividends On 22 July 2010 Rs 5 On 03 Nov 2010 Rs 2.50 On 12 Aug 2011 Rs 3.50 On 02 Nov 2012 Rs 4
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Source : www.bseindia.com

Total gains = Rs 15 Total capital gains on the stock price = Rs. (165.65 79.30) = Rs 86.35 Hence, the returns realized by Mr X = ((86.35 + 15 )/79.30) * 100 = 127.80% Exercise 2: Bombay Burmah Trading Corporation announced Dividend on 29 May 2012 and Stock Split on 8th August Dividend Decision 27-07-2012 28-07-2012 26-07-2012 566.00 (deducting dividend of Rs 7 from July 26 closing price) 541.65 (closing price on 26 July 2012) 542.00 63 782 8% 55.51% 3.55% 1.29% 9.74% 1.1 8% 7% 15.7% Stock-Split Decision 09-11-2012 NA NA 122 ( theoretical price after split) 118.65 ( after split) 610 ( before split) 12.61 156.45 8% 55.51% 3.55% 1.29% 9.74% 1.1 8% 7% 15.7%

Record date Book Closure date Ex-Dividend date Theoretical EX-Dividend Price

Ex-Dividend Price Price Before Announcement of Dividend EPS BOOK Value Per share ROE (%) Payout ratio Growth rate Dividend Yield Ke: PV of Dividends Model Beta Risk-free rate Risk-Premium Ke with CAPM

What are your observations on Price Sensitivity due to Dividend and Stock Split Decisions? Whether these corporate actions have given any abnormal returns to shareholders? It has been observed that the stock price rises unusually after announcement of stock split, giving anywhere from 15-20% returns to the investors. Just after the split, the stock price dips to a certain extent before stabilizing. Similarly, the stock price rises till the ex-dividend date and then dips downward after the ex-dividend date. Exercise 3: HEG Limited has announced buy back of shares on 25 March 2011. Answer the following questions by referring relevant material available on public domain

What are the motivations of the company to announce buy back? To send out a positive signal, i.e. that management considers the company to be undervalued. Buying back shares and cancelling them increases the value of the remaining shares. Share buyback is also a tax efficient way of distributing earnings to the shareholders. Smoothing out share price fluctuations. What is the dividend record of the company? Sep 2011 and Sep 2012 Final Dividend of 50% Feb 2011 Interim Dividend of 50% Sep 2010, 2009 and 2008 Final Dividend of 100%, 65% and 30% respectively What are the price reactions to these announcements? When the buyback was approved the stock price was INR 202, within a couple of weeks of the announcement the stock price rose to a high of INR 256. Do you think continuing shareholders benefited out of this buy back? In the long run continuing shareholders did not benefit as the stock price fell below the pre announcement price in the same fiscal year (closed below INR 175 by end of 2011).

Exercise 4 What is the dividend yield of the corporate sector in India? 2009-10, 10-11, 11-12? The dividend yield of the Nifty (which can be used as a proxy for the corporate sector) was approx 2% in 2009-10 and 1% for the next 2 years. What are the payout ratios? The payout ratio over these 3 years has remained stable at around 24%. Which are the high dividend paying companies? What are the P/E ratios of these companies? On the BSE 30 the high dividend paying companies are ONGC (3.8%), Tata Steel (3.11%), Coal India Limited (2.89%), BHEL (2.76%) P/E ratios are ONGC (8.88), Tata Steel (275.64), Coal India Limited (14.04), BHEL (8.32) Outside the BSE 30 top dividend yields are for Kilitch Drugs (79.47%), Smartlink Net (61.72%), JB Chemicals (47.76%), Amrit Banspati (43.99%) P/E ratios for these companies are Kilitch Drugs (0.59), Smartlink Net (NA negative profit), JB Chemicals (15.47), Amrit Banspati (0.74) Are there any zero-dividend paying companies? What are the P/E ratios of thee companies Ace Software Exports (11.52), Aditya Birla Money (negative earnings), Archidply Industries (16.52)