The company, in a release issued after its board meeting on Monday, said it was extending its financial year to a 15-month period ending, June 30, 1998, to take on account the sale proceeds and to issue additional dividend subject to legal and statutory approvals. Its initial payout almost equals its profit after tax for the previous year. An extraordinary general meeting has been convened for May 14.

The sale of Lakme's manufacturing facilities will ensure an inflow of Rs 29 crore into its coffers, along with the Rs 130 crore netted from its brands' sellout and 50 per cent stake in Lakme Lever. But it has decided to retain at least half the sale proceeds.

The company is also sitting onsubstantial reserves, which was a whopping Rs 131.88 crore at the end of the previous fiscal. Its present reserves' level could not be ascertained.

At the board meeting, Lakme decided to pay the dividends in two stages. The maximum dividend that can be paid after providing for statutory reserves and dividend-tax, for the first stage, would be about Rs 60 per share (600 per cent), the release said.

The company intends to recommend a "substantial large dividend" in the second phase. The second dividend has been proposed to be paid at a later date out of a part of the past-accumulated profits. But this is subject to obtaining legal and statutory approvals, the release adds.

The company says a significant part of the available funds will be paid out to shareholders in the form of dividends (which would be tax-free in their hands under existing laws).

From the balance, a portion will be used for the business needs relating to investment in the new retailing activity which the company's subsidiary hasentered into. "The balance will be used to ensure the generation of sufficient income and profits to pay dividends to its shareholders till the new retailing activity generates adequate profits," the company has said.

Lakme's stock slumped after the dividend announcement and the scotching of rumours that the company would be merged into other Tata group firms. The scrip dropped to Rs 212.50 per share on the Bombay Stock Exchange from the previous close of Rs 214.60.

It is not yet clear along what lines the company will expand its retail business. It has so far only acquired and inaugurated a single store, Littlewoods, in Bangalore. In fact, sources say the stock's market cap has taken a severe beating since the sellout announcement to Levers. The price has declined from around Rs 270 before the announcement to about Rs 207. It was expected that the company's board would take some "meaningful decisions" on its future at its meeting. While it has not defined these strictly, it has put to rest speculationsabout the possibility of a merger of Lakme with a sister concern.

May change its name

Informed sources say Lakme Ltd is likely to change its name, which will be announced shortly. This follows a string of restructuring exercises in the offing, which will signify the company's new line of business, retailing, after having broken away from its earlier business of cosmetics, in which it reigned supreme.

The company may even adopt "Littlewoods" as its new name, which will relate the company to its new line of business.

The change in name is also as Lakme's brand rights have been sold to Hindustan Lever after the cosmetics major decided to sell its holding lock, stock and barrel in Lakme Lever.