Usually dividend payment is considered a normal business resolution and is accepted by the shareholders. But the management proposal of dividend payment totaling Rs 30 crore was rejected by the shareholders, a first time for Unitech and rare in the stock market.
Unitech in its filing on the Bombay Stock Exchange said, "The shareholders did not approve the payment of dividend and the resolution for declaration of dividend on Equity Shares for the financial year ended March 31, 2011 rescinded."
In May of 2011, the Board of Directors at Unitech had recommended a dividend of Re 0.10 for every equity share of face value of Rs 2 each for 2010-11 fiscal. Therefore, at the annual general meeting (AGM) the proposal was presented to shareholders for their approval.
Different media segment reported that the company said to the effect that shareholders had rejected the idea of dividend as it can be put to better business opportunities in a high interest rate and an uncertain economic environment. But they were also reports that shareholder's felt that the amount was too less compared to the profits and hence the shareholders' rejected the move.
As of June 30, 2011, the promoters hold 48.57% stake in Unitech and the rest 51.43% is held with the public. The company's net profit was Rs 567 crore in FY 2010-11. This was less than profit in FY 2009-10 at Rs 675.05 crore. Although net sales was up by 8.7% at Rs 3,187.09 crore FY2011.
VIEW: Ascertaining the reason for rejection is difficult as both the arguments hold weightage but the good news is shareholder activism is necessary as it would help the company improve its performance.