InvestorQ : What does the issue of bonus debentures by Britannia mean for shareholders?
Moii Chavate made post

What does the issue of bonus debentures by Britannia mean for shareholders?

Answer
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Tisha Malhotra answered.
3 weeks ago


One of India’s most successful FMCG multinational companies, Britannia Industries, approved the issue of bonus debentures along with the payment of cash dividends to reward shareholders in the uncertain pandemic times.

Under the terms of the bonus debentures, Britannia will issue a redeemable and fully paid-up debenture with face value of Rs.29 as a bonus debenture to shareholders in the ratio of 1:1 for each share held. This bonus debenture will be paid out of its general reserves.

This will be in addition to the cash dividend as Britannia will also pay a cash dividend of Rs.12.50/ share. What is the logic of paying via bonus debentures? The decision is more a method of retaining liquidity within the company in the midst of tough economic conditions.

This is the second time Britannia has issued bonus debentures to shareholders, as it had done some 3 years ago. Unlike cash dividends, this allows better liquidity management as the outflows get phased out over a period of time.