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Huge Dividends and a Majestic Run

December 17 2020
Majesco Announces Interim Dividend at the rate of 19,480%
Majesco on Tuesday received approval from its board of directors for an interim dividend of Rs 974 per share of the face value of Rs 5 each for the financial year 2020-21. The total amount of dividend to be paid is Rs 2,788.4 crore. It fixed December 25 as the record date. Excluding this, the company has Rs 103 crore in cash, which is also to be distributed to shareholders.
It owns an office building (Seven-storey) in Navi Mumbai, wherein it collects rent from Majesco U.S. It also holds an adjoining land where construction is underway, expected to conclude in March.
In July, the company had announced its intention to sell its U.S.-based arm to a PE firm, for a consideration of $594M.
In October, the company had announced a buyback of 25% of its equity, i.e., 74.7M shares at Rs 845 per share amounting to Rs 770 crore.

 
Company’s Future Plan:
Upon receiving the board’s approval, the company shall distribute excess Rs 103 crore cash to its shareholders.
Depending on the real estate market, the company shall monetize its office space and distribute the proceeds to the shareholders in the best method.
Tax Implications
Let’s say investor A bought Majesco shares at Rs 374 and sells it at Rs 974. Capital gain per share will be Rs 600.
If A bought Majesco shares less than a year ago, then the tax will be short-term capital gains (i.e., 15%). The tax outgo would be Rs 90.
If A bought Majesco shares before a year, then the capital gains will be taxed at long-term capital gains tax (i.e., 10%). The tax outgo would be Rs 60.
But if an investor gets a dividend, the entire Rs 974 (declared dividend) will be taxed at the applicable tax slab. If an investor is in the 30% income bracket, then tax will be Rs 292. If an investor is in the 20% income bracket, then the tax will be Rs 195. 
Also, investors with total income below Rs 5 lakh a year, who get a tax advantage under section 87A have to be careful about dividends. Because dividends are added to the total income, if the aggregate income exceeds Rs 5 lakh, then the individual’s income becomes taxable.

 
If an investor bought shares for dividend: If the shares are sold off within three months of purchase, then the capital loss cannot be adjusted against other capital gains.
Till last year, dividends were not taxable. Hence, there was interest among investors to buy shares before the dividend announcement to pocket tax-free dividends and exit the stock post dividends. Post-dividend disbursal, the stock price declines, and the investors used the capital loss to offset the capital gains in other stocks. This is also called Dividend Stripping. But, due to the change in taxation, this is not possible now.
Majesco Limited:

 
 
 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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