IT firm Hinduja Global Solutions tanks as street expected two times the dividend announced

• Shares of Hinduja Global Solutions slipped 20% on Friday as investors were disappointed with the dividend amount announced by the company.
• The company has declared a third interim dividend of ₹150 per share.
• Analysts say the street expected about two times the dividend amount announced.

Shares of Bengaluru-based information technology (IT) firm Hinduja Global Solutions crashed 20% in a single day as investors were highly disappointed with the company’s dividend announcement.

The company has declared the third interim dividend of ₹150 per share for the current financial year FY22 along with a 1:1 bonus share issue, which means for every one share an investor holds in the company, he/she will get an additional share.

However, this was below investors’ expectation considering the company had a good cash reserve after it sold its healthcare services business to Barings Private Equity Asia in August 2021 for an enterprise value of ₹8,906 crore ($1.2 billion). With this, the street expected two times the dividend offered by the company.

“The company has around ₹8,000 crore of cash reserves at the moment and it has given a dividend amounting to ₹315 crore as dividend, which is not even 4% of cash reserves. The street expected a dividend of at least 5-10% of cash reserves,” Kranthi Bathini, director of equity strategy at WealthMills Securities, told Business Insider.

In fact, shares of the company had risen about 19% since August, when the company announced the stake sale on expectation of a higher dividend.
“Dividend they have paid is much much lower than what the street was expecting. Estimates were higher because they had big cash in their books and they also received huge amounts from selling its healthcare business,” said an analyst from a domestic broking firm on condition of anonymity.

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