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VSNL recommends dividend of 500 pc

Our Bureau

MUMBAI, July 10

VIDESH Sanchar Nigam Ltd today announced a record dividend of 500 per cent, its highest-ever, including a one-time special dividend of 400 per cent.

The board of directors of Videsh Sanchar Nigam Ltd, which met to approve the annual accounts, recommended a normal dividend of Rs 10 per equity share and, additionally, a special one-time dividend of Rs 40 per equity share. The total dividend would be Rs 50 per share of face value Rs 10.

This jumbo dividend is close to the maximum that the board could have recommended for the year without having to seek special permission from the Government.

The total dividend outgo will amount to Rs 1,425 crore this year, Mr R.S.P. Sinha, Director, Finance, VSNL, told Business Line. This is less than the net profit of Rs 1,778 crore during the same year.

The board is authorised to recommend any dividend provided it does not exceed the profits of the company for the year, said Mr Sinha.

The tax outgo will amount to Rs 145 crore and the Government, as the largest shareholder, with a roughly 52 per cent stake in the company, will get Rs 755 crore in dividend, said Mr Sinha.

A news release from VSNL said the special dividend ``coincided with the listing of VSNL scrip on New York Stock Exchange.''

However, sources said that certain quarters in the Government had wanted that the State extract for itself some of the enormous cash reserves of the company before its disinvestment.

The demand was in the backdrop of what happened with Balco, where the fact that the new dispensation had control over the enormous cash reserves of the company caused much displeasure in certain quarters.

While the cash reserves of over Rs 4,000 crore would be untouched by this dividend, the profits of the year, at least, would not add substantially to it, said the sources.

The existing cash reserves are abundant for the capex plans of the company and it would have been unnecessary to add to it, said an official.

Some months ago, a BJP member of the Rajya Sabha had actually proposed that the Government take out a portion of the cash reserves of VSNL through announcement of a special dividend. The Department of Telecommunications had also apparently taken this vie w. It was not very pleased that the new corporate which would manage VSNL through its 25 per cent stake in it, would have control over such a huge cash balance. ``It is like the handing the cash over on a platter,'' said sources.

The Department of Disinvestment, however, felt this would bring down the value of VSNL since the loss of its monopoly in long-distance telephony in 2002 would leave it without a distinct business profile.

VSNL's turnover in 2000-2001 amounted to Rs 7,695 crore, up 10 per cent from the previous financial year; net profit amounted to Rs 1,778 crore, up 112 per cent from the previous year.

VSNL closed the day at Rs 317.85 per share on the BSE, gaining Rs 12.35 over yesterday's close of Rs 305.5 per share.