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India Inc holds back on dividends

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India Inc’s big dividend payers are either doling out less or keeping payouts at last year’s levels

Krishna Kant  |  Mumbai  May 4, 2017 Last Updated at 19:08 IST

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The 2016-17 dividend season has started on a poor note for shareholders with growing at its slowest pace in three years. The combined by 250 early bird is up just one per cent during 2016-17, down from 2.8 per cent growth in FY16 and five-year compounded annual growth rate (CAGR) of 19.8 per cent.

Among the included in this list are also some of corporate India’s biggest dividend payers, which are either paying lower dividend in FY17, or have decided to keep at the same levels as last year.

For example, information technology (IT) major Wipro’s is down two-thirds to Rs 486 crore in FY17 from Rs 1,482 crore a year ago. is paying 50 per cent less dividend in FY17 as its battles rising and stagnant profits. Other big dividend payers such as and also cut payout for FY17, while cement major ACC did not announce any dividend for calendar year 2016.

The analysis is based on the 250 which have announced or paid interim and final dividend for CY17 or FY17. The figures exclude the dividend distribution tax paid on the amount by the company. Among top dividend payers (in absolute terms), Hindustan Zinc, and are not raising dividends, while for Tata Consultancy Services, and Infosys, it’s up in low single digits.

Poor is, however, not due to profitability concerns – the combined net profit of the sample was up 10.8 per cent in FY17, marginally down from 11.1 per cent year-on-year growth reported in FY16. On average, are distributing 28.5 per cent of their net profit as equity dividend in FY17, down from 31.3 per cent in the previous year and 34 per cent in FY15. As a result, retained profits grew 15 per cent in FY17 for the sample, the fastest pace in five years.

Top in cash-rich sectors such as IT services cut back on as they plan to return a large part of their surplus cash to their shareholders in the form of share buyback which doesn’t attract dividend distribution tax and additional dividend tax, which is a 10 per cent tax on dividend income over Rs 10 lakh a year for shareholders.

In FY17, listed cumulatively announced buyback worth around Rs 60,000 crore equivalent to around 40 per cent of all dividend paid by listed in FY16.

“Equity dividend attracts dividend distribution tax first in the hands of and then the additional dividend tax in the hands of shareholders if their annual dividend income exceeds the threshold. This is pinching promoters and high net worth individuals who are pushing their to use buyback rather than dividend route to reward shareholders,” says G Chokkalingam, founder & CEO,

Early this year, announced share buyback worth Rs 16,000 crore. It was followed by and which planned to return Rs 2,500 crore and Rs 3,500 crore, respectively, to shareholders through share buyback.

In aggregate amount, central public sector such as Coal India, NMDC, Bharat Electronics, Oil India, and have the biggest share buyback programme, which largely benefitted their promoter shareholder – the government of India.

Analysts, however, say that the buyback goes against the interest of retail investors (with annual dividend income of less than Rs 10 lakh). “Many retail investors buy and hold shares of cash-rich to earn a steady stream of Share buyback hurts them as they would now have to first surrender their shares and then buy them again. Many will not like this constant churn,” adds Chokkalingam.

Among early birds, is the largest dividend payer with total payout of Rs 11,620 crore to its shareholders for financial year 2016-17. It is followed by (Rs 9,261 crore) (Rs 5,892 crore) and (3,255 crore).

Maruti Suzuki was among the few to buck the trend as it more than doubled the FY17 payout to Rs 2,265 crore from Rs 1,057 crore a year ago. Other to announce double-digit hikes include HDFC Bank, Nestle India, Castrol, Siemens, Ambuja Cement, and among others.

In all, the in our sample cumulatively plan to pay Rs 51,018 crore worth of dividend for FY17 against Rs 50,535 crore last fiscal.

In comparison, all listed together paid around Rs 1.56 lakh crore worth of equity dividend in FY16. Some of the big dividend payers missing in the early bird sample include (FY16 topper), Oil and Natural Gas Corporation, ITC, NMDC, Hindustan Unilever, among others.

India Inc holds back on dividends

India Inc’s big dividend payers are either doling out less or keeping payouts at last year’s levels

India Inc’s big dividend payers are either doling out less or keeping payouts at last year’s levels

The 2016-17 dividend season has started on a poor note for shareholders with growing at its slowest pace in three years. The combined by 250 early bird is up just one per cent during 2016-17, down from 2.8 per cent growth in FY16 and five-year compounded annual growth rate (CAGR) of 19.8 per cent.

Among the included in this list are also some of corporate India’s biggest dividend payers, which are either paying lower dividend in FY17, or have decided to keep at the same levels as last year.

For example, information technology (IT) major Wipro’s is down two-thirds to Rs 486 crore in FY17 from Rs 1,482 crore a year ago. is paying 50 per cent less dividend in FY17 as its battles rising and stagnant profits. Other big dividend payers such as and also cut payout for FY17, while cement major ACC did not announce any dividend for calendar year 2016.

The analysis is based on the 250 which have announced or paid interim and final dividend for CY17 or FY17. The figures exclude the dividend distribution tax paid on the amount by the company. Among top dividend payers (in absolute terms), Hindustan Zinc, and are not raising dividends, while for Tata Consultancy Services, and Infosys, it’s up in low single digits.

Poor is, however, not due to profitability concerns – the combined net profit of the sample was up 10.8 per cent in FY17, marginally down from 11.1 per cent year-on-year growth reported in FY16. On average, are distributing 28.5 per cent of their net profit as equity dividend in FY17, down from 31.3 per cent in the previous year and 34 per cent in FY15. As a result, retained profits grew 15 per cent in FY17 for the sample, the fastest pace in five years.

Top in cash-rich sectors such as IT services cut back on as they plan to return a large part of their surplus cash to their shareholders in the form of share buyback which doesn’t attract dividend distribution tax and additional dividend tax, which is a 10 per cent tax on dividend income over Rs 10 lakh a year for shareholders.

In FY17, listed cumulatively announced buyback worth around Rs 60,000 crore equivalent to around 40 per cent of all dividend paid by listed in FY16.

“Equity dividend attracts dividend distribution tax first in the hands of and then the additional dividend tax in the hands of shareholders if their annual dividend income exceeds the threshold. This is pinching promoters and high net worth individuals who are pushing their to use buyback rather than dividend route to reward shareholders,” says G Chokkalingam, founder & CEO,

Early this year, announced share buyback worth Rs 16,000 crore. It was followed by and which planned to return Rs 2,500 crore and Rs 3,500 crore, respectively, to shareholders through share buyback.

In aggregate amount, central public sector such as Coal India, NMDC, Bharat Electronics, Oil India, and have the biggest share buyback programme, which largely benefitted their promoter shareholder – the government of India.

Analysts, however, say that the buyback goes against the interest of retail investors (with annual dividend income of less than Rs 10 lakh). “Many retail investors buy and hold shares of cash-rich to earn a steady stream of Share buyback hurts them as they would now have to first surrender their shares and then buy them again. Many will not like this constant churn,” adds Chokkalingam.

Among early birds, is the largest dividend payer with total payout of Rs 11,620 crore to its shareholders for financial year 2016-17. It is followed by (Rs 9,261 crore) (Rs 5,892 crore) and (3,255 crore).

Maruti Suzuki was among the few to buck the trend as it more than doubled the FY17 payout to Rs 2,265 crore from Rs 1,057 crore a year ago. Other to announce double-digit hikes include HDFC Bank, Nestle India, Castrol, Siemens, Ambuja Cement, and among others.

In all, the in our sample cumulatively plan to pay Rs 51,018 crore worth of dividend for FY17 against Rs 50,535 crore last fiscal.

In comparison, all listed together paid around Rs 1.56 lakh crore worth of equity dividend in FY16. Some of the big dividend payers missing in the early bird sample include (FY16 topper), Oil and Natural Gas Corporation, ITC, NMDC, Hindustan Unilever, among others.

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Krishna Kant

Business Standard

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