HLL Shareholders Approve Bonus Debenture Scheme By 99.99% Majority

HLL shareholders present and voting at the Bombay High Court-convened meeting on August 9, 2002, supported the proposed bonus debenture scheme as follows: the bonus debenture scheme was approved by shareholders, representing 430 of the shareholders present and voting at the meeting and holding 1260985339 shares, representing 99.9994% of the value of shares on which the poll was held. The scheme will now be submitted to the Bombay High Court. The company will also seek other statutory approvals.

As per the Scheme, in addition to a Bonus Debenture of Rs.6 each per share, HLL will also pay a Special Dividend of Rs.2.76 per share as part of the Scheme. The entire tax on Bonus Debentures and Special Dividend will be deducted out of the Rs.2.76 Special Dividend, ensuring that the face value of the Bonus Debenture is uniform at Rs.6. Both the Bonus Debenture and the Special Dividend will be payable by reference to the same Record Date as may be fixed for allotment of Bonus Debenture. The interest on the Bonus Debentures, redeemable after a period of 18 months from the record date, will be 9%.

After their issuance, HLL has offered to buy back the debentures -- less than 1000 debentures per original debenture holder and upto a limit of Rs.100 crores on a first-come-first-serve basis during the first 12 months commencing from the date of issue of debentures. A consortium, led by HSBC, will also offer a scheme to buy back the Debentures at a rate determined by the consortium.

HLL had originally proposed the Bonus Debenture Scheme in 2001, entailing issuance of one Bonus Debenture of the face value of Rs.6 per share of Re.1, and this scheme had been approved by the shareholders on December 12, 2001.

Before the Scheme could be implemented, the Government changed taxation laws, as per the Finance Act 2002, making dividend taxable in the hands of the shareholders.

HLL therefore revised its Bonus Debenture Scheme to make the Scheme self-financing such that shareholders, even at the highest tax bracket, do not have to pay tax on these Bonus Debentures (construed as deemed dividend) out of their own pocket. It is this revised Bonus Debenture Scheme which shareholders approved on August 9, 2002.

The Scheme now includes Clause 4A which authorises the HLL Board to make necessary changes in the Scheme, within the existing financial parameters, should any changes be required due to any changes in the taxation laws, before the Scheme is implemented, in a manner which ensures equity amongst all shareholders. The Clause provides that, while implementing such changes, the withdrawals from the General Reserves and withdrawals from the Profit & Loss Account will not exceed Rs.1321 crores and Rs.608 crores respectively, as provided for in the Scheme.

The Clause also mentions that in case the Dividend Distribution Tax or any such tax is reintroduced, HLL can adjust the resultant amount from the Special Dividend to release funds for meeting obligations arising from reimposition of such taxation.