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● The basic and diluted earnings per share for the year ended 31st March, 20X3.

Assume that income tax is applicable to CAB Limited and its subsidiaries at 25%.
SOLUTION

1. Calculation of the liability and equity components on 6% Convertible debentures:

Present value of principal payable at the end of 4th year (Rs 1,80,000 thousand x 0.74)
= Rs 1,33,200 thousand

Present value of interest payable annually for 4 years (Rs 1,80,000 thousand x 6% x 3.31)
= Rs 35,748 thousand

Total liability component = Rs 1,68,948 thousand

Therefore, equity component = Rs. 1,80,000 thousand – Rs 1,68,948 thousand

= Rs 11,052 thousand
Calculation of finance cost and closing balance of 6% convertible debentures:
Year Opening Finance cost Interest paid Closing

balance Rs in @ 8% @ 6% balance Rs in
’000 Rs in ’000 Rs in ’000 ’000

a b = a x 8% C d = a + b - c
31.3.20X2 1,68,948 13,515.84 10,800 1,71,663.84
31.3.20X3 1,71,663.84 13,733.11 10,800 1,74,596.95

Finance cost of convertible debentures for the year ended 31.3. 20X3 is Rs 13,733.11 thousand and closing

balance as on 31.3. 20X3 is Rs 1,74,596.95 thousand.
Calculation of Basic EPS Rs in ’000

Profit for the year 39,000
Less: Dividend on preference shares (80,000 thousand x Rs 0.05)* (4,000)
Profit attributable to equity shareholders 35,000

* Only dividend on preference shares will be reduced because the net amount after all payments will be
available for distribution to equity shareholders.

Weighted average number of shares = 20,00,00,000 + {5,00,00,000 x (9/12)} = 23,75,00,000 shares or
2,37,500 thousand shares

Basic EPS = Rs 35,000 thousand / 2,37,500 thousand shares = Rs 0.147
Calculation of Diluted EPS Rs in ’000

Profit for the year 39,000
Less: Dividend on preference shares (80,000 x 0.05) (4,000)

35,000
Add: Finance cost (as given in the above table)* 13,733.11
Less: Tax @ 25% (3,433.28) 10,299.83

45,299.83
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