Do you believe that a company can provide a return of 1,00,000% on its shares in 11 years?
Yes, you read it right. This unbelievable milestone is achieved by Bajaj Finance Ltd. It has provided a return of 1,00,000% to its shareholders. In March 2009, the shares of Bajaj Finance Ltd. were floating at a price of ₹ 4.69 per share on the stock exchange. As of November 2020, the share price is more than ₹ 4, 700 per share. This simply means that if you had invested ₹ 10, 000 in the stocks of Bajaj Finance Ltd. in March 2009, then the current value of those shares would be in Crores.
History of the Company
Bajaj Finance Ltd. is the most diversified NBFC in India. It is a subsidiary of Bajaj Finserv Ltd., which in turn is a subsidiary of Bajaj Holding and Investment Ltd. It was incorporated in March 1987 as a private company. The company went public in 1994. It offered equity shares of ₹ 10 each at a premium of ₹ 80 per share. In 2000, the company crossed the milestone of ₹ 500 Crores in annual disbursement. By 2006, the company doubled this figure. In 2006 only, the Company’s Assets Under Management (“AUM”) crossed ₹ 1, 000 Crores. The shareholder’s funds crossed the benchmark of ₹ 1, 000 Crores in 2008. This figure doubled in 2012. Next year in 2013, the Company’s Assets Under Management (“AUM”) crossed the milestone of ₹ 20, 000 Crores. In 2014, Bajaj Finance Ltd. acquired Bajaj Financial Solutions Ltd. for ₹ 17 Crores. In 2017, the company crossed yet another benchmark of ₹ 75, 000 crore AUM. It also bagged the 16th position in the overall market cap ranking by crossing the market capital of ₹ 1.5 Lakh Crores. Although the pandemic affected the business, the company still managed to increase its AUM by 27% making it worth ₹ 1, 47, 153 Crores.
Even during the setback of the COVID-19 pandemic, it continued to generate profits due to which its share price kept on increasing. It provides less dividend as compared to other companies. So far, the company has provided a dividend of ₹ 164.1 per share. And in this year alone, the company has provided a dividend of ₹ 16 per share.
P.S.: This information regarding the dividend is based on the data provided from 2001 onwards.)
Though its dividend may not seem very attractive, but the heights its share price has reached is commendable. If you had invested ₹ 5, 000 in March 2009 in its shares, then the value of those shares as of the day would be in crores.
- Suppose you bought shares of Bajaj Finance Ltd. in March 2009 for ₹ 5, 000.
- The No. of shares you would have bought = ₹ 5, 000/ ₹ 4.69
- Thus, you would have purchased 1, 066 shares.
- In 2012, the company issued bonus shares in the ratio of 1:1.
[Bonus Shares are the shares issued by a company to its shareholders as fully paid up shares without receiving any money from their shareholders. In other words, the company, by issuing bonus shares, gives a gift to its shareholders].
Issuing bonus shares at a 1:1 ratio means, that for every share owned by a shareholder, the company will issue another share in his name. This means that if you had 1, 066 shares, in the beginning, then it has now become 2, 132 shares, i.e., double the initial shares.
- Now, the price of 1 share of Bajaj Finance Ltd., as of 20th November 2020, is ₹ 4, 717. Thus, the value of your shares as of date is,
₹ 4, 717 x 2, 132 shares = ₹ 1, 00, 56, 644 (One Crore Fifty-Six Thousand Six Hundred Forty-Four)
- The above amount is only the price of the shares. We have not calculated the dividends that you have received so far.
- As we have stated, the dividend is not much but ₹ 34, 112 is no less. And this is the dividend received only in this financial year.
Now you can calculate your total dividend accordingly.
So, if you had invested ₹ 5, 000, eleven (11) years ago, in the shares of Bajaj Finance Ltd., then you would have become a Crorepati today. Now, suppose you forgot about the existence of these shares and therefore, have not claimed its dividend for the past 7 years straight. If that is the case, then you are not in the possession of these shares anymore, although you are the rightful owner of the same. The said shares have been transferred to the IEPF Account of the Government. As per the Government’s guidelines, such shares are now treated as forgotten shares because no one has claimed dividends on them for more than seven years. Since the shares had unclaimed dividends, they are now in the possession of the Government of India under the Investor Education and Protection Fund (“IEPF”). The Government introduced it in 2016 to resolve the problem of such ‘long lost and forgotten shares’.
About Investor Education and Protection Fund
As stated above, the Government introduced the IEPF to address the ever-increasing problem of people forgetting their shareholdings in a company. The IEPF was launched to promote the protection of interest, and awareness of the investors. The unclaimed dividend and lost shares transferred to this account are taken care of by the Government on behalf of the rightful shareholders. The dividends on the shares remain unclaimed for years because people tend to forget that they own the shares in the first place. There are multiple reasons why people forget about their ownership in a company:
- Investors forget to appoint a nominee for their shares. Therefore, the heirs remain clueless about their ownership of such shares, and the shares remain deserted.
- A small amount of investment makes investors forget about the shares.
- Shares get attached to the court’s proceedings for they become a part of the property dispute. Thus, remain ownerless till the court’s verdict.
There are many other reasons why an investor forgets about his/ her shareholding in a company. This is the reason why many companies have abundant shares with them with no sign of ownership.
Before the introduction of the IEPF, the companies were required to transfer the unclaimed dividends and unclaimed shares to the government funds which were used by the Government under various public welfare schemes and for various developmental works. When the Government saw that it was a very big loss for the investors, then the Government decided to set up the IEPF. It is a platform provided to the investors where they can approach the government to claim their dividends and ask them to refund their long-forgotten shares. Investors can claim their dividends and shares from the fund manager by applying to the managing authority. Because of the establishment of IEPF, people can claim their dividends and shares of different companies through one platform instead of going to each company individually.
Laws Governing IEPF
Companies Act, 2013 and Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 are applicable on the functioning of the IEPF. These laws state that the shareholders get 30 days to claim the dividend after it gets declared by a company. If the dividends remain unclaimed by the shareholders, then the company must transfer such dividends to a special account, opened in the name of the company, called ‘Unpaid Dividend Account’.
The company has to publish a list of all the shareholders along with their unclaimed dividend on its website within 90 days of transferring the amount to the ‘Unpaid Dividend Account’. Once the amount reaches the ‘Unpaid Dividend Account’, the shareholders have to file an application to the transfer agent of the company to claim the payment of the unclaimed dividends. If the shareholder fails to claim the amount for 7 years or more due to the above-mentioned reasons or any other reason, then the company is required to transfer the unclaimed dividend to the IEPF. Since the dividend remains unclaimed for more than 7 years, the shares are also considered as forgotten. Thus, they are also transferred in the name of the IEPF along with their dividends.
Note: The shares which are transferred in the name of the IEPF are the ones on which the dividend has been declared by the company, and the shareholders have failed to claim the same for a consecutive period of 7 years.
Dividends and Shares of Bajaj Finance Ltd. in IEPF
The Annual Reports of a company state the current status of the dividends and shares of the company which is transferred to the IEPF account. According to the Annual Report, 2019-2020 of Bajaj Finance Ltd., all the unclaimed dividends up to the financial year 1995-1996 accumulated with the company were transferred to the general revenue account of the Central Government. As stated above, before the introduction of the IEPF, the funds used to get transferred directly to the Central Government. The shareholders, who want to claim the stated amounts must apply to the Registrar of Companies (“RoC”), Maharashtra. The complete address of the RoC where the shareholders will have to approach is Registrar of Companies (“RoC”), Maharashtra, Pune, Block A, 1st and 2nd Floor, PCNTDA Green Building, Near Akurdi Railway Station, Pune (411-044).
All the unclaimed dividends, from the financial year 1996-1997 to 2013-2014, accumulated with the company, along with the shares, were transferred to the IEPF Account in the name of the Central Government. The unclaimed dividends and shares were transferred to the IEPF pursuant to Section 124, Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, for the shareholders failed to claim their dividends for more than 7 years.
Unclaimed dividends declared by the company for the financial year 2013-2014 were recently transferred to the IEPF in August 2020. The deadline to claim the dividends for the financial year of 2014-2015 will be given in this year’s annual financial report. In case a shareholder wants to claim his/ her dividends, then he/ she can approach the Company Registrar/ Transfer Agent of the Company with the required documents.
An investor can check the status of their unclaimed dividend, declared by TCS, from https://www.bajajfinserv.in/finance-investor-relations-unclaimed-dividends
For more information, visit https://www.bajajfinserv.in/fy20-bajaj-finance-limited-annual-report.pdf
Shares transferred to the IEPF
According to the Annual Report 2019-2020 of the company, Asian Paints has transferred the following unclaimed shares to the IEPF during the Financial Year of 2020:
|Financial Year||Number of Shareholders||Number of Unclaimed Shares|
In the previous financial year, Bajaj Finance Ltd. has transferred Seventy Thousand Two Hundred (70, 200) unclaimed shares in the account of IEPF. The total number of shareholders whose shares were transferred to the IEPF is 64. It might seem that the number of shareholders, whose shares are transferred to the IEPF, is not much. But if we compare it to the number of shares they held, then we can see the amount of loss those 64 shareholders have incurred. The 64 shareholders together lost the shares worth ₹33,11,33,400 (Thirty-Three Crores Eleven Lakhs Thirty-Three Thousand Four Hundred).
P.S.: This amount is calculated by multiplying the shares transferred by the current price of the share.
70, 200 shares x ₹ 4, 717 = ₹ 33, 11, 33, 400
As we can see, the number of unclaimed shares transferred to the IEPF account worth crores. The company has a huge chunk of unclaimed shares in the IEPF. The shareholders are advised to look into their investment history, or the ownership of shares passed on from a deceased family member and claim their dividends and shares from IEPF.
Unclaimed Shares & Unclaimed Dividend Transferred to IEPF
What happens to the shares and the dividend transferred to the IEPF? Do you lose all your rights over your dividend income along with your shares?
As stated above, a shareholder used to lose the rights over the dividend amount and the shares once they were transferred to the Government funds. However, with the introduction of IEPF, a shareholder retains his/ her right over the dividend amount as well as the shares which were transferred to the IEPF Account. All he has to do is apply to the fund manager of the IEPF. Nonetheless, Bajaj Finance Ltd. still send individual letters, through posts and other modes of communication, to make their shareholders aware of their holdings in the company and ask them to make timely claims for their dividends. Once the dividends, along with the shares, get transferred to the IEPF, then it becomes a little difficult for the shareholders to recover their shares. This is because the procedure followed by the fund manager, to refund the dividend amounts and the shares, is time-consuming. To make sure that the refund goes to the rightful owner, they make thorough scrutinization of all the applications before initiating the transfer of the amount and the shares. This is the reason why Bajaj Finance Ltd. advises its shareholders to claim the dividend from the company itself as it takes less time, and it is an easy process. The shareholders can apply to the Company’s Registrar or the Transfer Agent to claim the dividends. However, if your shares are already transferred to the IEPF, then you can approach the Nodal Officer of the company, appointed in this regard. To contact the Nodal Officer of Bajaj Finance Ltd., write an email to [email protected]
The Necessity of Legal Help?
The application procedure to claim the refund of lost shares and unclaimed dividends from the IEPF Authority is a tricky and tedious process, and it requires a certain degree of technical knowledge. If you hire a legal professional, then you can circumvent this headache as your legal expert will take care of this. He will also ensure that the application contains no mistakes to avoid rejection from the IEPF Authority. He will also do all the tedious tasks; from collecting the information from the company about the dividend and shares to collecting the required documents to filing the said application.
If your shares are involved in any family dispute, then the legal expert will come in handy. As stated above, it is common for a shareholder to die before appointing any nominee. In such a case, the family members of the deceased come to claim his property which includes the shares he bought in his lifetime. Nobody wants to leave the shares of Bajaj Finance Ltd. which are worth more than a crore. I mean who will want to let go of such shares for nothing. And when there are so many claiming members in a family, then there is always a family dispute. A legal professional or a legal firm will help you to manage all such disputes related to the ownership of the shares. A lawyer knows all the laws and nitty-gritty of the loopholes around the distribution of the family assets, therefore, he can provide you with the best deal possible.
As we have seen, Bajaj Finance Ltd. has given a return of 1, 00, 000% to its shareholders in the last 11 years. Due to this ever-increasing pace of the share price, ₹ 5, 000 invested in the shares of Bajaj Finance Ltd. in March 2009 are worth more than ₹ 1 Crore today. It is the best time to sell these shares as it will also help you to cope with the financial difficulties, if any, arose due to the pandemic. Thus, if you just came to know about the existence of such shares in your name, which were left to you by your deceased family member, then it is the best time to redeem them. You will also receive the dividend accumulated over time. An unexpected gift of ₹ 1 Crore is nothing less than hitting a jackpot. It is advised that you check out the links above that will take you to the required section of the company’s website. Gather information regarding your dividends accumulated so far, along with your shareholding in the company, and file an application to claim your dividend from Bajaj Finance Ltd. You will have to apply to the Nodal Officer of the Company, by contacting them at [email protected] However, if your dividend amount and shares are already transferred to the IEPF, then you will have to file your application through the fund manager of the IEPF. For this, I will advise you to find a legal expert as soon as possible and apply to the IEPF Authority for the refund of the unclaimed dividend and the recovery of the transferred shares. A legal expert will also help you to fight for the shares stuck in a family dispute.