Summary

Kapil sugars limited was set up in 1985 in utter pradesh by Vrun Kapil,a sugar technologist. The comapny
had a chequered history for a decade.thereafter,it achived a certain degree of stability.it has done
particularly well in the last five year.
Presently the company is managed by Satish Kapil and Arun Kapil,the two sons of Varun Kapil who
inheritade the business.
Recently the company was an unlisted company.wholly owend by the two brothers and their families.
Last year company went public when the kapil family offered 25 % of its equity stake to the general
investing public through an offer for sale.
The brother have very ambitious plan for expandind the business .thats why they creat the option for
raising money from the capital market.
Companies earnings and net investments as below table.
1 2 3 4 5
earnings 96 108 84 115 147
Net
investment
104 94 90 108 192

21 million shares of 10 par are outstanding.
Resurve and surplus at the end of year 5 stood at 560 million.
Declared a dividend of rs 2.00 per share(for 5 year)
As long as the company was wholly owned by the Kapil family,now board of directors has decided to
developed a well thought dividend policy.




C). If the dept-equity norm of the firm 1:2what should have been the dividend payment year-by-
year,for each of the five years under:
I. Pure residual dividend policy
II. Fixed dividend payout policy
III. Smoothed residual dividendpolicy
Assume that the firm has a dividend payout ratio target of 0.3
1 2 3 4 5
Earning (Et) 96 108 84 115 147
Investment 104 94 90 108 192
Equity investment
EPS 4.57 5.14 4.0 5.48 7.0

Fixed dividend