SEMB Stated capital reduced

ccsentha · 1 SEMB Stated capital reduced Mon May 09, 2011 8:32 pm

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Will this impact the share price, what does this exactly mean?

http://www.cse.lk/cmt/upload_cse_announcements/5901304940524_.pdf

Jana · 2 Capital reduction Mon May 09, 2011 8:46 pm

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A reduction of capital is a capital re-organisation that has the effect of allowing the return to shareholders of capital would otherwise not be distributable. A reduction of capital is used to increase distributable reserves to make dividend payments possible, or to make a large return of capital more efficient.

There are a number of possible mechanisms, including:

*a share buy back,
*the conversion of share capital and non-distributable reserves into debt capital
*the conversion of non-distributable reserves into distributable reserves.

One common scenario where a reduction of capital is useful is a company that has large accumulated losses but has returned to profitability and wishes to pay dividends. If large losses have been made in the past, it may take many years before balance sheet retained earnings turns positive again. However, if a business has genuinely returned to profitability and is likely to remain solvent, there is no real reason why it should not be able to pay some of those profits to shareholders.

The solution is to convert non-distributable reserves into distributable reserves.

Another common scenario is a company that simply no longer needs as much capital as it did — for example, because it has arranged a sale and leaseback that has taken a lot of assets off its balance sheet, or because it has sold a business.

One easy solution would be the conversion of non-distributable reserves to distributable, followed by the payment of a special dividend, This, however, would mean that many shareholders would be unable to avoid paying income tax on the special dividend. One alternative (that has been used by large UK listed companies), is to convert share capital into debt. Existing shares are cancelled and replaced with new shares (fewer, or with a lower par value) and bonds, the latter typically redeemable at the option of the holder. This allows shareholders to take the return of capital as a capital gain, and time it to their advantage.

Mechanisms such as this vary with the shareholder base (i.e. what sort of tax effects the majority of shareholders want). They will also evolve over time as tax rules change.

Share buy-backs are often not a real reduction in capital at all. Most companies that buy-back shares tend to buy small quantities every year, so their economic effect is to return current profits to shareholders in a way that appears (again) )as a capital gain.

RANGANA PERERA · 3 Re: SEMB Stated capital reduced Mon May 09, 2011 9:20 pm

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WHAT HAPPEN FOR SEMB FAMILY ?????? Sad

Jana · 4 Re: SEMB Stated capital reduced Mon May 09, 2011 9:51 pm

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I assume SEMB share price will rise more.. I don't have any theoritical idea. but When the LITE also Announced capital reduction in MAR 2010 . that time LITE traded @ 5/= level after this announcement it went up to 7/= ... So SEMB also May go up..

Anyway I thing SEMB finace statement will be improve this time and Dr. Senthilvel collect these stock more than 35 million last week so Some thing under this..

My Idea is SEMB.W15 is good when SEMB.N will move 10cts then w15 also may move by 10cts. so you can invest double stock comparethan with SEMB.N so make more money from SEMB.w15

If I am wrong please correct me.. thanks.

Monster · 5 Re: SEMB Stated capital reduced Tue May 10, 2011 1:00 am

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http://www.ft.lk/2011/05/10/smb-leasing-to-reduce-stated-capital-via-rs-628-m-loss-writeoff/

raa · 6 Re: SEMB Stated capital reduced Tue May 10, 2011 7:51 am

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To follow up on Jana's superb explanation, this impairment of stated capital is in fact to erase they company's carry forward losses. Otherwise it will have to make profits for several years to organically reverse its carry forward loss.

By reducing stated capital against losses, it can now start accumulating a cash reserve - maybe looking at paying out a dividend Very Happy

! This makes sense, as the company is looking to make the share attractive as warrant conversion date is coming up in a few months.

Although a dividend is at least a year away, the thought of getting 10 cents on a 80cent share (my purchase price at least for non-voting) and a 1.50rs share (voting) is awesome.

stumpy · 7 Re: SEMB Stated capital reduced Wed May 18, 2011 3:47 pm

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Jana wrote:I assume SEMB share price will rise more.. I don't have any theoritical idea. but When the LITE also Announced capital reduction in MAR 2010 . that time LITE traded @ 5/= level after this announcement it went up to 7/= ... So SEMB also May go up..

Anyway I thing SEMB finace statement will be improve this time and Dr. Senthilvel collect these stock more than 35 million last week so Some thing under this..

My Idea is SEMB.W15 is good when SEMB.N will move 10cts then w15 also may move by 10cts. so you can invest double stock comparethan with SEMB.N so make more money from SEMB.w15

If I am wrong please correct me.. thanks.

SEMB.W0015 is the perfect pick if you want to collect n keep!

Slstock · 8 Re: SEMB Stated capital reduced Wed May 18, 2011 4:06 pm

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stumpy wrote:

Jana wrote:I assume SEMB share price will rise more.. I don't have any theoritical idea. but When the LITE also Announced capital reduction in MAR 2010 . that time LITE traded @ 5/= level after this announcement it went up to 7/= ... So SEMB also May go up..

Anyway I thing SEMB finace statement will be improve this time and Dr. Senthilvel collect these stock more than 35 million last week so Some thing under this..

My Idea is SEMB.W15 is good when SEMB.N will move 10cts then w15 also may move by 10cts. so you can invest double stock comparethan with SEMB.N so make more money from SEMB.w15

If I am wrong please correct me.. thanks.

SEMB.W0015 is the perfect pick if you want to collect n keep!

Based on current financials and propects of LAL assocation SEMB seems to be on path of recovery.