The board of Dr Reddy's Laboratories has approved bonus debentures valued at Rs30 per share. The pharma major plans to issue six bonus debentures of Rs5 per equity share held.
According to the company, the bonus debentures would be redeemed at the end of 36 months and they would carry a coupon rate. The total payout would be Rs520 crore.
G V Prasad, vice-chairman and CEO, Dr Reddy's Laboratories said the payout would be in the form of dividend distribution tax.
The company has an aggressive capex programme and is expected to generate significant cash flows in the next few years, Prasad to CNBC-TV18.
Responding to a question as to what signal the company wished to send with the bonus debenture because while there was no cash flow currently, there would be an eventual cash outflow, Prasad said there were two signals, one was that the company had completed 25 years of operation and the company wanted to share its success with the shareholders for their support and belief in the company.
''Second, we are generating strong cash flows, of course we have an immediate capex programme, but we see that we will be generating significant cash in the next few years. So this will lead up to that and we will redeem the debentures in the third year.''
He said the coupon rate had not yet been decided and it had to go through a process of restructuring the reserves and that would take. The scheme would need approval of the company's shareholders, the RBI and Andhra Pradesh High Court.