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Enquiry regarding eps

I arora (28 Points)

25 September 2015

I had an enquiry regarding treatment of bonus issue in case of diluted EPS questions. 1. whether the bonus issue is to be taken for potential equity shares while calculating EPS or bonus is to be taken in the year after they have become equity shares eg. in 2013-14 bonus issue is 1:2 on 1.1.2014. On 1.1.2013 convertible debentures are issued. now are we supposed to take bonus issue for convertible debentures for year 2013-14 2. in calculating incremental EPS .. the bonus issue relating to potential shares is also to be take proportionality in denominator or bonus is to be taken for full year and potential shares proportionate to time period Thank you

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4 Replies

Mukund (Nil) (36 Points)
Replied 25 September 2015

I understood your query in this form.

2013-14 2014-15

Equity Issued 100 100

Debentures 100

Bonus Shares 50

Debentures converted 100

Total shares circulation 200 350

If the market is pricing your share at 2 it means the share price should be 400.Now after events are triggered ( debenture/Bonus) ideally share MCAP will be 500 ( adding the portion of debenture debt to capital +original mCAP) but distributed over 350 shares

A disclosure will be required in your financial statement of dilution which will happen from stock of 200 shares to 350 shares.The EPS or profit available potentially for distribution for new shareholders will now get reduced.The impact of this dilution will be 11% to existing shareholders with the debenture trigger.

Mukund (Nil) (36 Points)
Replied 29 September 2015

to further expand this

2013-14 2014-15

Normal Profit earned 200 200

Savings on interest of debenture 10 ( assume deb int at 10%)

Tax on debenture (3)

Profit available 200 207

EPS 1 0.60 ( on 200 & 350 share in circulation)

Pre dilution for existing shareholder 0.82 ( since bonus to current shareholder)

MCAP 400 500

Interest sacrifced by 250 350

current share holders 1.60 1.43 ( Impact 1.43/1.60) as 11%

Manmohanlal Gupta (9 Points)
Replied 29 September 2015

i have a share transfer deed stamped 2012 purchesd the shares in 2013 but could not get i the shares transfered. transfered.. nin my name in 2015. if i sell these shares now in 2015 i have got the fresh transfer deed and got the shares transfered in my name in sept 2015.if i sell these shares in oct 2015 will i get advantage of long term capital gain.

Mukund (Nil) (36 Points)
Replied 29 September 2015

When you got the share,do you have a brokerage contract with you which shows STT paid on this transaction in 2012.Secondly have you made payment to the Broker by way of cheque.Were transactions carried through official stock exchange.All those details will be required.