Hi Chintan, I think your questions are very basic in nature. Just read some good books on accounting fundamentals and all your questions will be clear. 1. The promoters have their own stake in the company and whenever a company makes a dividend payout, the promoters are getting their share of profit. Let me explain with an example. Company: ABC Shareholding Pattern: (Total shares : 1000) Promoters --> 50% (500) Institutions --> 20% (200) FIIs --> 10% (100) Public & Others --> 20% (200) If the company declares dividend of Rs 1/share, then the promoters make Rs 500 on their 50% stake in the company. I think you are not clear about the free-float market cap and total market cap. Kindly read about it and clear your doubts. Similarly, if a company is diluting its stake by raising funds for its future expansion, then its current share capital will also be evaluated by merchant bankers. The IPO price will factor in the profits that are arising out of its existing business into the IPO price band. Hence, the future profits will be distributed evenly among all the shareholders. Hope, i have given you some basic understanding of the profit distribution theory. Read on about the free-float market cap and you will then be able to calrify your concepts.
On Mon, Aug 18, 2008 at 11:31 AM, <[EMAIL PROTECTED]> wrote: Dear All, I have some confusion regarding following. Generally company EPS is calculated as Net operation profit/No. of outstanding shares. Few question to understand real EPS. A. Generally good companies equities to general public is only 10% , most of equity is with institutional investors. MF, FII etc. and substantial part is with promoters. For example if company has outstanding share 1000 nos ( including general public and institutions) and made profit of 1000 Rs. Its EPS would be "1 rs". 1. What will promoters do in that case? they will not take any profit?? 2. How they can take any profit, where it is shown in balance sheet? B. Generally companies want to plan IPO for expansion or start new business which they are running from so many years. ( for example ABC company want to expand its existing manufacturing facilities which is existing from 20 years. ABC company is not listed on any of exchanges. If say they will float IPO in sept 2008 to raise 10 million Rs by issue of 100,000 (1 lacs) equity issues, and have total asset before issue of IPO is 200 million. If after one year this company made net profit of 1 million Rs, How the EPS will be calculated EPS = 1,000,000 ( Net profit)/ 100,000 (outstanding share) = 10 rs In this case what happened to profit generated from its own assets which was not part of shareholders equity?? Where the profit goes from it?? Where it is shown on balance sheet. Appreciate if some senior members of the groups will clarify above questions. Regards. Chintan N. Patel ======================================================= Confidentiality Notice This communication and the information it contains:- (a) Is intended for the person(s) or organisation(s) named above and for no other person(s) or organisation(s). (b) May be confidential, legally privileged and protected in law. Unauthorised use, copying or disclosure of any of it may be unlawful. If you have received this communication in error, please contact us immediately by email at [EMAIL PROTECTED] ======================================================= -- I know God will never give me more than I can handle, I just wish He didn't trust me so much. -- Posted By Ronald Chisley to Investor Forums at 8/18/2008 12:19:00 PM --~--~---------~--~----~------------~-------~--~----~ Logon at – http://investorline.co.in/blogs/news Learning Center- http://investorline.co.in/blogs/learning Mutual funds - http://investorline.co.in/blogs/mutualfunds Life Insurance - http://investorline.co.in/blogs/lifeinsurance Investor Journal - http://investorline.co.in/blogs/investor Latest News - http://investorline.co.in/blogger/?q=aggregator/categories/ Create your own Forum & Blog at - http://investorline.co.in/blogger To post to this group, send email to [email protected] Visit this group at-http://groups.google.com/group/investor-forums?hl=en -~----------~----~----~----~------~----~------~--~---
