Before filing IPO, IndiGo pays dividend to promoters

As long as the company has made disclosure (regarding dividend payment), it is fine, said a market analyst.

July 20, 2015 11:29 pm | Updated 11:29 pm IST - MUMBAI:

Eleven days before filing the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on June 30, 2015 to raise $400 million through an initial public offer (IPO), the board of directors of InterGlobe Aviation Ltd. that owns low-cost airline IndiGo approved the payment of final interim dividend of Rs.99.7 crore to promoters for 2014-15.

The board also approved a dividend payment of Rs.1,002.90 crore to the promoters for 2015-16 as well.

This move has evoked mixed reaction from analysts and experts who spoke on the condition of anonymity. While a section finds this perfectly normal for a private company, others feel that the money should have stayed in the company for its expansion and capital requirement purposes.

“As long as the company has made disclosure (regarding dividend payment), it is fine. It is normal for promoters to take away profits before money is shared with the public after the IPO,” said a market analyst.

“The promoters should have utilised the money in the company rather than raising funds to meet capital expansion plans and to retire debt. Dividend payments by growing companies to promoters affect liquidity,” said another analyst at a brokerage.

“If you have money, then why are you going to the public?” asked an expert.

For 2014-15, the company declared four interim dividends. These include Rs.160.60 crore paid in later part of 2014, Rs.593.2 crore paid on January 12, 2015, Rs.226 crore paid on March 23, 2015. And the final interim dividend of Rs.99.7 crore was declared on June 2015. This puts the whole year’s dividend at Rs.1079.6 crore.

“Our financial statements have yet to reflect interim dividends paid after December 31, 2014. On June 19, 2015, our company declared an interim dividend (excluding dividend distribution tax) of Rs.99.70 crore for fiscal 2015 and an interim dividend of Rs.1,002.90 crore for fiscal 2016, each for 3.07 lakh equity shares,” the company has mentioned in the risk factors of the DRHP.

“The restated financial statements provided in this DRHP do not reflect these interim dividends. Any reliance by persons on the financial disclosures presented in this DRHP without considering these interim dividend payments should accordingly be limited,” the company added in the risk factors.

InterGlobe Aviation has been paying dividend in all years since 2010-11 till now, except for 2011-12. For 2010-11, the company paid a dividend of Rs.490.4 crore, while for 2012-13 it paid two dividends totalling Rs.548.60 crore. In 2013-14, the company paid Rs.377.50 crore.

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