Among textile firms listed on the country's stock exchanges, Island Textile Mills Limited is in a class by itself in many respects. Its paid-up capital has remained at Rs 5 million with just half a million shares of Rs 10 each.
This despite consistently high sales which stand at Rs 1.83 billion for the 3 quarters of 2010-11 and the net profit for the period amounting to a fantastic Rs 818 per share and expected to cross Rs 1000 per share for the year - something of a record when seen in relation to the paid-up capital of just 5 million. The sales and earnings would be something to rejoice over by the shareholders but for the fact that the management's dividend policy over the years has been to give shareholders as poor a return as possible. For several years, the cash dividend stagnated at between just 10% to 25% or Re 1.0 to Rs 2.5 per share out of very high earnings.
Last year (2009-10) in a burst of generosity the company gave out a cash dividend of Rs 5 per share out of earning amounting to Rs 359 per share ie just 1.4 percent of the net earning was given out to the shareholders. With no stock dividend ever given, the paid-up capital has stagnated at Rs 5 million.
I recall that some years ago, it was made mandatory for listed companies to give out at least 40% of their net earnings as payout to shareholders. That largesse lasted just one year and allegedly under the pressure of the textile lobby, the requirement was withdrawn completely although it could have been scaled down to some other figure if 40% was considered unreasonable.
I hope the management of ITML which have to meet shortly to finalise its 2010-11 accounts, would turn a new leaf in its otherwise ultra conservative policy and see its way to giving out say Rs 100 per share as cash dividend and 100% stock dividend. The cash payout would still be no more than 10% of its expected EPS for the year, and the paid-up capital would still be only Rs 10 million, way below norm considering the sales and earnings of the well-managed enterprise.