Nestle India has announced that it plans to utilise part of its internal reserves and share premium account for distribution to its shareholders.

In a communique to the stock exchanges the company said its board of directors would meet on January 15, to consider the proposal.

The board would consider a scheme formulated under Sections 391 to 394 of the Companies Act, 1956, with Sections 100 to 102 for enabling utilisation of part of the general reserve and the share premium account of the company, for consequent distribution thereof to the shareholders, it said.

The proposed scheme of arrangement would be subject to approval of the shareholders, creditors of the company and the high court.

Companies return cash to shareholders through various ways like issue of dividends, bonus debentures or to buy back shares. Earlier, Hindustan Lever Limited issued bonus debentures and more recently Astra Zeneca is proposing the same.

Companies return cash to shareholders when they have adequate internal reserves and there are no huge investment plans in the near future.

By returning cash to shareholders companies lower their own capital employed and improve their asset utilisation ratio.

Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Discussion Group