NCLT approves Britannia's Rs 720cr bonus debenture issue

The National Company law Tribunal (NCLT) has approved issuance of bonus debentures by the Britannia Industries Ltd to its shareholders, which was announced in 2018 in the company's centenary year.

The company had last year announced issuance of secured redeemable non-convertible debentures as bonus debentures of Rs 60 in the ratio of one such debenture for every equity share at an interest rate not exceeding 8 per cent to be paid annually for a period of three years.

The Kolkata bench of the NCLT in its August 2 order had approved the scheme of arrangement for issuance of the debenture bonus to its shareholders.

According to the company, it had proposed issuing 12,01,59,147 bonus debentures and the same would be listed on BSE and NSE.

The company had total free reserves and securities premium of Rs 3,196 crore as on March 2018.

Bonus debentures have some benefits like it does not entail an immediate large cash outgo.

That means the money, until the maturity of the instrument, may be used to fund new projects or acquisitions. There is neither equity dilution unlike in the issue of bonus shares.

Also, interest paid on the debentures can be claimed as an expense by the company thereby helping reducing tax incidence, analysts said.