Anupam,
I believe our current calculation of returns in India in automated software is not correct for the following reason. Hence the hurdle rate has to be corrected for this anomaly.
Take two companies having 100 crores profit – One with 20% dividend payout ratio (avg pvt sector) and another with 80% (good PSUs) have effective return of 96 and 84 crores after reducing their DDT of 4 and 16 respectively. ROCE calculations in US assumes dividend tax in the hands of the owner whereas in India it is different. Whether it is good or bad depends on your personal tax rate.
Then comes CSR of 2% on 3 year avg PBT. I am still not clear about its accounting. Can anyone help? Is it shown as an expense? Else it needs to be taken out of ROCE again.
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