In a first-of-its kind move, Colgate Palmolive (India) announced on Thursday a Rs 122 crore (Rs 1.22 billion) bonanza for its shareholders under which it will pay Rs 9 for every share while reducing its equity capital and the cash on its books.

The face value of the shares will be reduced from Rs 10 to Re 1 and equity share capital from Rs 136 crore (Rs 1.36 billion) to Rs 13.6 crore (136 million), even as the total number of shares remains unchanged.

Of the Rs 122.4 crore (Rs 1,224 million) dole, the majority will go to the New York-based parent, in proportion to its 51 per cent equity holding.

The company is seeking "deemed dividend" status for the payment. If that is granted, the recipients will not have to pay tax on it. The company will bear the stipulated 17 per cent tax, amounting to Rs 20.8 crore (Rs 208 million).

The move will shore up the company's key investment indicators like the return on equity, return on net worth and dividend yield.

This gives market analysts the confidence that the share price of the company, which closed at Rs 351.80 on Thursday on the Bombay Stock Exchange, will not suffer much due to the proposal.

To be taken up for approval by shareholders on July 27, the move will bring the face value of Colgate shares at par with that of other fast moving consumer goods companies like Hindustan Lever. This is subject to the approval of the Bombay High Court.

At an analysts meet in Mumbai today, the company explained that the proposal would drain away excess cash from its reserves that were being used for treasury operations.

"Since treasury operations are not the company's main area of operations, it has decided to reward the shareholders. In the process, the company's return on equity will go up significantly.

However, it will leave the company with enough resources to fund ongoing operations," said an analyst.