Capital Structure

Debt-Equity Ratio

Debt Share Capital Reserves

2005-06 2006-07 2007-08 2008-09 2009-10 558.24 89.33 95.18 149.37 127.75 244.76 244.76 489.52 489.52 489.52 7,056.62 8,543.50 10,284.69 12,449.29 15,427.84

D/E Ratio
0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2005-06 2006-07 2007-08 2008-09 2009-10

D/E Ratio

The above bar chart shows the trend for Debt/Equity ratio for last 5 years for the company. It can be seen that the Debt/Equity ratio reduced in 2006-07 from 0.08 to 0.01. The trend shows that the company is gradually working towards becoming a debt-free company in coming years as it has considerably reduced its leverage. Reduction is Debt-Equity ratio is because of two reasons: a. Reduction in debt in the capital structure. b. Increase in share capital in 2007-08. Share capital was increased by issuing 1:1 bonus shares during the period.

739.639.5 1 0.46 19.775.32 3.50 68.75 43.33 35. While material expenses increased by 51% in 2008-09 period.517.60 28.504.803.66 58.837.613.71 33.058.307.43 2.40 58. This indicates the presence of operating leverage.60 98.33 21.41 64.22 6.44 4. the administrative expenses increased by 40%.77 4. ¡ ¤ £    £ 2. These 2 factors lead to lower growth in EBIT which further resulted in a lower DOL value.05 34. In 2008-09. except 2008-09 period. the DOL is less than 1 due to disproportionate increase in certain expenses like material expenses and administrative expenses.06 ¡  ¢ ¢ DOL DOL 2006-07 2007-08 2008-09 2009-10 .5 0 Sal BIT In PS 2005-06 2006-07 2007-08 2008-09 2009-10 14.11 88.42 30.5 2 1.Degree of Leverage Degree of Operating Leverage: Value of DOL is greater than 1 for all years.

During 2006-07. But it is mainly because of presence of Non Cash adjustments of Rs. DFL is less than 1. hence lowering the EPS. the DFL value is greater than or equal to 1. ©¨ ©©¥ © ©©¥ © ©©¥ © ©©¥ . For years 2008-09 and 2009-10. But this does not imply absence of financial leverage. implying presence of financial leverage. The value for 2007-08 is in negative as bonus shares were issued during that period. 300cr during 2005-06 period which boosted the EPS. hence less than expected percentage growth in EPS next year end. This resulted in doubling the number of outstanding shares.Degree of Financial Leverage: DFL §¦ © © §¦ © ¨ §¦¨ §¦ ¥ ¥ §¦¨ ¨ - - - - - - DFL - - The degree of financial leverage values are shown in above graph.

Bonus Issue: BHEL issued bonus shares to the shareholders in the ratio of 1:1. 325 crore to Rs. . c.476 crore to 48.52 crore.476 Outstanding Shares Number of outstanding share doubled from 24.952 50 40 30 20 10 0 Before Bonus After Bonus 24. Number of outstanding shares: Outst nding h res 48.76 crore to Rs. b.Payout Policy 1.952 crores. Increasing the authorized share capital from Rs. The announcement for the same was made on 25th Jan 2007 and a resolution was passed at the extraordinary general meeting on 30th April 2007. 489. Share capital increased from Rs. The record date for the issue of bonus shares was set as 1st June 2007. Issue bonus shares in 1:1 ratio resulting in doubling of the number of outstanding shares. 244. Following actions were taken regarding payout of bonus shares: a. 2000 crore.

767.000.500.80 to 1399.Change in share price because of bonus issue: Sh re Price Ch nge 3.10 Share Price Change The issue of bonus shares resulted in a decrease in price of the shares for BHEL.00 2.399.80 2.00 0.00 1.00 500.45%.500.00 30/05/2007 31/05/2007 1. The company in last 5 years has paid both interim and final dividends. Price reduced from 2767.000.00 2. Thus issue of bonus shares thus resulted in reduction in share price keeping the total market capitalization at the same level.000. Below is the chart showing the dividends paid by company in last 5 years: .00 1. Dividend Payout: BHEL has consistently been paying dividends to its shareholders. 2.10 or by 49.

50% 123% 110% 80% 90% 62.2 Million after bonus issue.58 300 250 233 200 150 100 50 0 2009-10 Dividend Paid Dividend % .4895.66 600 400 200 0 2005-06 2006-07 2007-08 2008-09 145 354.9 152.50% 90% 60% 125% 20% 85% 40% The final dividend of 60% for 2006-07 was on enhanced paid-up share capital of Rs.Announcem ent Date 4/3/2011 26/05/2010 21/01/2010 27/05/2009 30/01/2009 26/05/2008 25/01/2008 28/05/2007 25/01/2007 1/6/2006 7/3/2006 8/12/2005 Effective Date 18/03/2011 1/9/2010 9/2/2010 1/9/2009 17/02/2009 1/9/2008 13/02/2008 30/08/2007 13/02/2007 1/9/2006 22/03/2006 22/12/2005 Dividend Dividend (%) Type Interim Final Interim Final Interim Final Interim Final Interim Final Interim Interim 132.52 170 1140.18 746. Hence effectively the final dividend on previous share capital comes to 120%.5 245 832. The total dividend amount paid by the company each year is shown in graph below: 1200 1000 800 599.

Providing regular and high dividends ensures investor¶s interest in the stock of the company. 10 for last 5 years. . This is inline with the company¶s strategy to have more of equity in the capital structure and make the company debt-free.We can see that company has paid dividend regularly and over 100% on face value of Rs.

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