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NTPC said on Thursday that the company will issue bonus debentures to each of its shareholder amounting to an issue size of ₹10,306 crore. This is the first time that a public sector company is issuing bonus debentures.
The company will issue bonus debenture of ₹12.50 each to every shareholder of equity shares of ₹10. The debentures will have tenure of 10 years. The coupon rate will be around 8.3 per cent and will be listed on both NSE and BSE.
NTPC's Director (Finance) K Biswal said that issuing bonus debentures will reward shareholders without reducing the company's cash reserves or cutting down the share value. “Shareholders can monetise it immediately. While the debentures itself won’t be taxed if they are monetised, any premium above ₹12.50 will be taxable,” said Biswal.
The move will also help improve the company's capital structure, said Biswal.
“Often a complaint is that we are under-leveraged with a debt to equity ratio of 0.8 per cent which increase to 1.1 per cent, so our overall capital structure would improve. The weighted average cost of our total debt will become 9.97 per cent,” he added.
On December 31, the company had a total standalone debt of ₹ 75,000 crore.
NTPC’s share price surged on the BSE after the announcement. At 2.36 pm, the company’s shares were trading 3.57 per cent higher on the BSE at ₹159.55.
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