Insurance technology firm Majesco on Tuesday entered the record books as it announced an eye-popping interim dividend of 19480 per cent or Rs 974 per share.

At its board meeting on Tuesday, the directors approved the payment of this interim dividend for the current financial year. It translates into an amount of
Rs 2,788.4 crore on a shareholder base of 28.577 million shares.

The company said in a regulatory filing to the stock exchanges that following the dividend payout, the balance cash reserves estimated at Rs 103 crore will be distributed to shareholders, subject to board and regulatory approvals.

At the face value of Rs 5 per share, the dividend of Rs 974 per share translates to a rate of 19480 per cent, which is the highest declared by any listed firm in recent times.
Shares of Majesco reacted positively to the dividend announcement as it hit a new high of Rs 1,019 on the BSE during intra-day deals, thus rising almost 5 per cent over the previous close. However, the share shed some of its gains to close at Rs 982.80 — a gain of Rs 8.60, or 0.88 per cent, over the last close.

While dividend payouts are always good news for shareholders, the Majesco announcement, however, led to questions about the taxes that the investors would have to pay. It may be recalled that recipients did not have to pay tax on dividends till March 31, 2020 as the company (which declared the dividend) paid the dividend distribution tax.

However, this year’s Union budget went back to the classical system following which all dividends received after April 1, 2020 is taxed in the hands of the individual.

Therefore, in this case if the individual is holding even one share of Majesco and is in the 30 per cent tax bracket, he or she will have to pay a tax of Rs 292. The incidence on high net worth individuals will be much higher as they will be subject to a higher surcharge.

Some of the experts are, therefore, suggesting that it will be better for an investor to sell the Majesco shares or book profits instead of paying a higher amount as dividend tax.
Tuesday’s announcement comes after the company came up with a share buyback plan of up to Rs 631.26 crore. The buyback opened on November 27 and closed on December 11.

As regards the future plans on monetisation of real estate, the management said this could take longer- over a year and depending on real estate market conditions. The company added that post monetisation of real estate it will decide the best method for distribution of sale proceeds to shareholders.

In July this year, Majesco, had signed a definitive agreement to be acquired by Thoma Bravo, L.P., a leading private equity firm focused on the software and technology-enabled services sectors, in a transaction valuing the company at $594 million.