Hammer and tongs: Taparia Tools’ dividend yield comes in at 1550%

Nashik-based Taparia Tools is engaged in manufacturing and supplying a range of carpentry and woodworking tools.

Pun intended, this hand tool maker has given a titanic dividend for its Rs 11-stock!

Did that make your eyes pop out of your head? Oh yes. You read that right.

For the year ended March 2023, Taparia Tools declared a final dividend of Rs 77.50 a share and an interim dividend of Rs 77.50, translating into a dividend yield of 775 percent each. This means the company has declared a final dividend of Rs 155 per share for the last fiscal, implying a dividend yield of 1,550 percent.

This Nashik-based company is engaged in manufacturing and supplying a range of carpentry and woodworking tools, a gamut of screwdrivers, pliers and hacksaw blades and the like, apart from electrical, lamps and lighting systems, tools in collaboration with Germany’s Elora, engineering and workshop tools, gardening tools and  equipment, and so on.

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With such a Herculean dividend, this hand tools manufacturer teases -- Hold me if you can!

But the rub is that the promoter entities and related persons own almost the whole company. The promoters have been maintaining their holding at 70 percent while the public shareholding has remained at 30 percent. Most of the public shareholders are also related to the promoters.

For instance, Veer Enterprises, which is involved in spinning, weaving and finishing of textiles, holds about 9 percent stake in Taparia Tools. Anil Taparia is one of the directors at Veer Enterprises. Other public shareholders include Shree Kanta Devi Taparia, Anant Taparia, and Aryaman Taparia.

Taparia Tools is a very illiquid stock with only 30.36 lakh shares outstanding, out of which 70 percent is with promoters (the Taparia and Bangur families). Moreover, out of the public holdings, 17.5 percent are with the Taparia and Bangur family members, which could be directly or indirectly related to the promoter families, said Vinit Bolinjkar, head of research, Ventura Securities.

“So in the case of Taparia Tools, most of the dividend money will go to the promoters and promoter family,” highlighted Bolinjkar.

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Having said all that, of course companies are at liberty to announce hefty dividends when borrowings are negligible, have decent cash balance and zero debt. “A company which is generating strong revenue and profitability and has significant cash and cash equivalents on its balance sheet can afford to pay healthy dividends to its shareholders,” said Bolinjkar.

He added that the company is a net debt-free company and has cash and cash equivalents of Rs 90 crore.

Taparia Tools reported strong growth in revenue and margin over the past five years. Over FY18-23, the company’s revenue has grown compounded annually at 13.5 percent to Rs 764 crore, EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) at nearly 35 percent to Rs 94 crore, and net profit at 39 percent to Rs 72 crore.

Meanwhile, between FY18 and FY23, the company’s operating and profit margins have improved by 707 basis points to 12.3 percent and 587 basis points to 9.5 percent, respectively.

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