CALCUTTA ELECTRIC FINANCES
It is as well in these days of defeatist talk about the Empire that we should be reminded of our solid achievements. A glance at the record of the Calcutta Electric Supply Corpora- tion will do no harm. Year after year its sales of electricity have increased, huge capital expenditure has been incurred, charges have been reduced and net profits have been held within a narrow range of fluctuation around L360,000. Critics may say that the British investor has done well out of this enterprise. That is true, but it is not inconsistent with the fact that the consumer in India has been provided with a steadily-growing system of distribution at a falling cost per unit. The work of expansion goes on and, as Lord Meston made clear at the meeting, has involved expenditure which calls for fresh financing. This, he explained, would take the form of an issue of new ordinary LI shares at par in the proportion of one new share for every £5 of ordinary stock now held.
In relation to the current price for the existing ordinary Li units of 36s. the issue terms obviously confer a bonus, but Lord Meston intimated that stockholders must be pre- pared for a reduction in the dividend rate from the ro per cent. tax-free level maintained in each of the past two years to 9 per cent. This projected reduction is the result of further drastic cuts in charges side by side with inelastic wage rates and heavy taxation. On an ex-rights basis the shares will be quoted at 33s. 3d. to give a gross yield of roughly 71' per cent. on the 9 per cent_ tax-free dividend. In normal conditions that would be considered a very high return on an equity of this calibre even allowing for the Indian political risk. Although I cannot envisage a rise in dividend rate I feel that the shares are cheap in view of the obvious scope for expansion and further issues of capital on bonus terms.
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