Dividend payout to promoters on the rise even as profits fail to keep up

India Inc’s promoters took home record dividends in FY15 notwithstanding a lacklustre financial performance by companies amid falling industrial and consumer demand. Promoters of a sample of 986 companies that declared dividends in FY15 received Rs 78,402 crore of dividend. It was 6.4% more than the previous year’s disbursement while net profit of the sample dropped by 5%. In addition, over one-third of the net profit of the sample was distributed as dividends — the largest in at least six years.

The overall growth rise in absolute dividend amount was fueled by select companies such as Eicher Motors, GSK Pharma, Page Industries, and TCS, which declared generous payouts following stellar profit growth.

Of the total sample companies, 342 companies reported YoY growth in dividends. Of this, one out of every 5 companies that reported higher dividends also reported a drop in the net profit.

Companies including Bajaj Auto, Oracle Fin Services Software Shree Cement & M&M increased dividends even as they reported a drop in profits.

Among the private sector promoters, Tata Group topped the chart with a dividend of Rs 12,130 crore against Rs 5,362.7 crore in the previous year.

This was led by a higher dividend from its group company, TCS. Compared to the dividend of Rs 32 a share in 2013-14, TCS paid a dividend of Rs 79 last fiscal, including a special dividend of Rs 40.

It was followed by Vedanta, Bharti, HUL, and Wipro. Promoter dividends of the sample increased nearly two and a half times since 2009-10, reflecting a five-year CAGR of 18.5%.

Inflation, as captured by the wholesale price index rose at a CAGR of 5.3%. Adjusting for inflation, dividends grew at a CAGR of 12.5%.