Century Textiles' board is meeting on May 6 to discuss the company's results for the year ended March 1997. Also on the agenda is a bonus issue, which has pushed Century Textiles' price up from Rs 2100 to over Rs 2450 in the last 4 trading sessions.

Century Textiles has huge accumulated reserves and has not followed a liberal bonus policy in the past. The reserves at over Rs 1000 crore are more than 22 times the equity of Rs 45.53 crore. Although bonus accounts for more than 88 per cent of the equity, the company has given bonus only once in the past 10 years. The latest one being in 1991 in the ratio of 3 shares for every 5 shares held. Other bonuses have been in 1986, 1980 and 1977. In the backdrop of falling profitability, it makes sense to go in for a bonus, provided the company hopes to improve its earnings substantially to service the enhanced equity. Even if Century Textiles declares bonus, the holdings will go up, but it is unlikely to boost a shareholder's wealth as with discouraging results, the scrip is bound to suffer.

Rewarding shareholders is fine, but when the profits are expected to take a severe beating, expanding equity can also backfire and will affect the EPS. The company is sitting on the reserves mountain. It's not really diversifying in a big way, and most industries where Century has interest are passing through a bad phase and profitability is shrinking. The company, which makes textiles, paper, cement and viscose yarn is also reportedly going slow on its new projects including a Rs 150-crore paper board plant in UP.

Further, it will be tough for the company to maintain a dividend of Rs 60 per share (Rs 100 face value) given last year. Any drop in dividend will not enthuse investors and if the company maintains the previous dividend, it will have to shell out more than Rs 27 crore.

Century Textiles will be yet another MAT victim. Tax provision along with high interest tax took its toll on Century's bottomline in the first half and net profit slipped by 66 per cent to Rs 34 crore, down from Rs 102 crore in the corresponding half of last year.

Indian Rayon to follow suit

Another Birla group company, Indian Rayon's board too is meeting on the same day to take up the bonus issue. Rumours of a bonus has pushed Indian Rayon's scrip from from Rs 330 to Rs 393 during this week. Indian Rayon is sitting on a huge pile of reserves of Rs 1,175 crore on an equity of Rs 44.97 crore. The company has not been liberal in the past and the last bonus announced was way back in 1980 in the ratio of 1:4 and the bonus content in total equity is less than two per cent. Indian Rayon posted a net profit of Rs 214.77 crore, an increase of 16 per cent over last year's Rs 184.75 crore. The other bonus candidates

Along with results, it's also the season of bonuses. And, expectations are running high in the market. Cipla's scrip has zoomed from Rs 380 to Rs 580 in a matter of few sessions. The last bonus from Cipla in 1994 was a liberal one when the company rewarded its shareholders with five shares for every one share held. Even today the company's reserves are at Rs 180 crore, almost 9 times its low equity of over Rs 20 crore. Further, the company has given 3 bonuses in the last 10 years.Dr Reddy's Laboratories' scrip has started moving up and has gained Rs 40 to Rs 225 in the last few sessions.

Dr Reddy's too has been liberal to give 3 bonuses in the last 10 years and the latest being the 2:1 in 1994. The company's current reserves at Rs 267 crore are over 10 tomes its equity.Moving up on liberal bonus expectation are the scrips of at least 10 companies. Colgate Palmolive has gained Rs 34 to Rs 313. NIIT in the last two months has shot up from Rs 220 to Rs 420 to settle at the current level of Rs 380. Wipro too has zoomed by Rs 125 to Rs 440 in a few sessions. Companies like Colgate, Castrol, Oriental Hotels, Ingersoll-Rand, Reckitt & Colman, Smithkline Beecham Pharma and Wipro have been liberal with bonuses and have given 3 or more bonuses in the last 10 years. A few are likely to repeat the feat in the coming months. The other bonus candidates

Along with results, it's also the season of bonuses. And, expectations are running high in the market. Cipla's scrip has zoomed from Rs 380 to Rs 580 in a matter of few sessions. The last bonus from Cipla in 1994 was a liberal one when the company rewarded its shareholders with five shares for every one share held. Even today the company's reserves are at Rs 180 crore, almost 9 times its low equity of over Rs 20 crore. Further, the company has given 3 bonuses in the last 10 years.Dr Reddy's Laboratories' scrip has started moving up and has gained Rs 40 to Rs 225 in the last few sessions.

Dr Reddy's too has been liberal to give 3 bonuses in the last 10 years and the latest being the 2:1 in 1994. The company's current reserves at Rs 267 crore are over 10 tomes its equity.Moving up on liberal bonus expectation are the scrips of at least 10 companies. Colgate Palmolive has gained Rs 34 to Rs 313. NIIT in the last two months has shot up from Rs 220 to Rs 420 to settle at the current level of Rs 380. Wipro too has zoomed by Rs 125 to Rs 440 in a few sessions. Companies like Colgate, Castrol, Oriental Hotels, Ingersoll-Rand, Reckitt & Colman, Smithkline Beecham Pharma and Wipro have been liberal with bonuses and have given 3 or more bonuses in the last 10 years. A few are likely to repeat the feat in the coming months. The other bonus candidates

Along with results, it's also the season of bonuses. And, expectations are running high in the market. Cipla's scrip has zoomed from Rs 380 to Rs 580 in a matter of few sessions. The last bonus from Cipla in 1994 was a liberal one when the company rewarded its shareholders with five shares for every one share held. Even today the company's reserves are at Rs 180 crore, almost 9 times its low equity of over Rs 20 crore. Further, the company has given 3 bonuses in the last 10 years.Dr Reddy's Laboratories' scrip has started moving up and has gained Rs 40 to Rs 225 in the last few sessions.

Dr Reddy's too has been liberal to give 3 bonuses in the last 10 years and the latest being the 2:1 in 1994. The company's current reserves at Rs 267 crore are over 10 tomes its equity.Moving up on liberal bonus expectation are the scrips of at least 10 companies. Colgate Palmolive has gained Rs 34 to Rs 313. NIIT in the last two months has shot up from Rs 220 to Rs 420 to settle at the current level of Rs 380. Wipro too has zoomed by Rs 125 to Rs 440 in a few sessions. Companies like Colgate, Castrol, Oriental Hotels, Ingersoll-Rand, Reckitt & Colman, Smithkline Beecham Pharma and Wipro have been liberal with bonuses and have given 3 or more bonuses in the last 10 years. A few are likely to repeat the feat in the coming months. The other bonus candidates

Along with results, it's also the season of bonuses. And, expectations are running high in the market. Cipla's scrip has zoomed from Rs 380 to Rs 580 in a matter of few sessions. The last bonus from Cipla in 1994 was a liberal one when the company rewarded its shareholders with five shares for every one share held. Even today the company's reserves are at Rs 180 crore, almost 9 times its low equity of over Rs 20 crore. Further, the company has given 3 bonuses in the last 10 years.Dr Reddy's Laboratories' scrip has started moving up and has gained Rs 40 to Rs 225 in the last few sessions.

Dr Reddy's too has been liberal to give 3 bonuses in the last 10 years and the latest being the 2:1 in 1994. The company's current reserves at Rs 267 crore are over 10 tomes its equity.Moving up on liberal bonus expectation are the scrips of at least 10 companies. Colgate Palmolive has gained Rs 34 to Rs 313. NIIT in the last two months has shot up from Rs 220 to Rs 420 to settle at the current level of Rs 380. Wipro too has zoomed by Rs 125 to Rs 440 in a few sessions. Companies like Colgate, Castrol, Oriental Hotels, Ingersoll-Rand, Reckitt & Colman, Smithkline Beecham Pharma and Wipro have been liberal with bonuses and have given 3 or more bonuses in the last 10 years. A few are likely to repeat the feat in the coming months. The other bonus candidates

Along with results, it's also the season of bonuses. And, expectations are running high in the market. Cipla's scrip has zoomed from Rs 380 to Rs 580 in a matter of few sessions. The last bonus from Cipla in 1994 was a liberal one when the company rewarded its shareholders with five shares for every one share held. Even today the company's reserves are at Rs 180 crore, almost 9 times its low equity of over Rs 20 crore. Further, the company has given 3 bonuses in the last 10 years.Dr Reddy's Laboratories' scrip has started moving up and has gained Rs 40 to Rs 225 in the last few sessions.

Dr Reddy's too has been liberal to give 3 bonuses in the last 10 years and the latest being the 2:1 in 1994. The company's current reserves at Rs 267 crore are over 10 tomes its equity.Moving up on liberal bonus expectation are the scrips of at least 10 companies. Colgate Palmolive has gained Rs 34 to Rs 313. NIIT in the last two months has shot up from Rs 220 to Rs 420 to settle at the current level of Rs 380. Wipro too has zoomed by Rs 125 to Rs 440 in a few sessions. Companies like Colgate, Castrol, Oriental Hotels, Ingersoll-Rand, Reckitt & Colman, Smithkline Beecham Pharma and Wipro have been liberal with bonuses and have given 3 or more bonuses in the last 10 years. A few are likely to repeat the feat in the coming months.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.