Strides Arcolab Limited's Dividend Payout Decision
(9 pages of text)
Arun Kumar, founder and group chief executive officer of Strides Arcolab Limited — a first generation, Indian pharmaceutical company headquartered in Bengaluru — is preparing for a crucial meeting of the Board of Directors. The meeting was called to discuss the proposed dividend payout to the company’s shareholders following the completion of a US$1.725 billion sale of its specialty division — Agila Specialties — to the U.S.-based pharmaceutical company Mylan Inc. Kumar proposed that Strides distribute all the free cash available from the sale — after the retirement of debt and internal payouts — in the form of dividends to its shareholders. Strides had already communicated its decision to retire debts and reduce its leverage.
Students should understand the following:
- The alternative ways a firm can distribute cash to its stockholders — share buybacks (repurchases) vs. dividends.
- The dividend decision and strategic factors affecting it.
- Analysis of the dividend policy using an appropriate framework.
- Investor preferences regarding dividends as well as the signaling and clientele effects.
Health Care Services
India, Large, 2013
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