The House of Tata Meets the Second Industrial Revolution by Chikayoshi Nomura

Author:Chikayoshi Nomura
Language: eng
Format: epub, pdf
Publisher: Springer Singapore, Singapore

Contingency reserves were also maintained for the purpose of long-term capital expenditure of the company proper or to finance other ventures handled by the same managing agent. After mentioning in a 1937 letter to his brother that “the Auditors are forcing us to deplete our hidden Reserves as well as the difficulties which they have raised about the Contingency Reserves,” A. P. Benthall explained that the company’s contingency reserve was being spent “on a variety of things mostly of a Capital or semi-Capital nature such as an extension to the jetty at Dalhousie, a new bale handling machine at Auckland and, in several cases, new productive machinery bought from Naihati.”71 No matter how they were spent, whether for current or capital expenditures, such hidden or contingency reserves were amassed at the cost of reduced dividend payments, and in fact, dividend payment reduction was often the explicit reason for establishing them in the first place. Again quoting E. C. Benthall in a 1937 missive to G. B. Morton , another Bird & Co . partner, expressing his opinion on the possible effects of amending the Indian Companies Act,you will see that we have here necessarily utilised Carried Forwards rather than drawing upon our reserves…this would have made it more difficult to reduce dividends as we have done…We are all in favour of reducing dividends as far as possible.72

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