NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
Meridian Pharma Ltd. has 10 crore shares and a net profit of ₹200 crore, giving EPS of ₹20. It plans a 1:1 bonus issue and also declares a dividend of ₹5 per share on the post-bonus share count. Ignoring other changes in profit, what will be the adjusted EPS and the total dividend outflow?
Adjusted EPS will be ₹10 and the dividend outflow ₹100 crore. A 1:1 bonus doubles shares to 20 crore, halving EPS from ₹20 to ₹10, and a ₹5 dividend on 20 crore shares costs ₹100 crore.
- AEPS ₹10; dividend outflow ₹100 croreCorrect
- BEPS ₹20; dividend outflow ₹50 crore
- CEPS ₹10; dividend outflow ₹50 crore
- DEPS ₹40; dividend outflow ₹100 crore
Explanation
A 1:1 bonus doubles shares to 20 crore. Adjusted EPS = 200 / 20 = ₹10. Dividend outflow = 20 crore x ₹5 = ₹100 crore. Using the old share count gives ₹50 crore, a missed adjustment, and EPS does not remain ₹20 as bonus shares dilute it.
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