Majesco has declared a dividend of 19,480%!

Majesco has declared a dividend of 19,480%!

Last updated: 16 Dec, 2020 | 06:21 am

Majesco has declared a dividend of 19,480%!

The board of Majesco has approved payment of interim dividend at the rate of 19,480% i.e. ₹974. The dividend translates to a near 100% of the current market price (~₹974).

Why such a huge dividend?

  • In July this year, Majesco US had sold its business to Thoma Bravo, L.P., a leading private equity firm at a valuation of $594 million. Majesco India held a 74.07 % stake in the US arm. After this sale, Majesco India was hardly left with any business as the investment in the US entity was the single largest asset it held.
  • The management had then made it very clear that it will distribute the entire proceeds to shareholders via a combination of buyback and dividends.

Road ahead

  • After the 25% equity buyback which closed recently and today’s announcement of interim dividend, the cash left on the company’s books amounts to ₹103 crore which the management says will be distributed as expeditiously as possible subject to board and regulatory approvals.
  • Besides this, the company holds some real estate, which the company will monetise and pay the proceeds to shareholders.

INDmoney Analysis

  • Investors who will be holding the stock as on the ex-dividend date of 23-Dec 20 will be eligible to receive the dividend. 
  • After the sale of Majesco’s majority of business, it had become apparent that the company might be heading towards a potential winding up. 
  • With such a huge dividend, the share price will fall proportionately as the value of the company will fall down sharply. Investors must not get too euphoric as the compensation in terms of dividend will be set off by a price decline after the stock goes ex-dividend on 23-Dec 20. 
  • The table below shows the breakup of the value left in the company.
  • Further with the asset sale taking more than a year to materialise it may be prudent to book your profits in the stock.