The Vedanta group's massive dividends in Q1 pushed India Inc’s total payouts to a five-year high even as the number of companies rewarding shareholders fell to its lowest since April-June 2019, according to a Mint analysis.
Vedanta Ltd. and its subsidiary Hindustan Zinc Ltd together paid a third of India Inc's nearly ₹43,000 crore dividend, according to the analysis of BSE-listed companies that paid dividends in Q1FY25. 176 companies announced a reward, the fewest since Q1FY20. The data only includes Q1 interim payouts and not the final dividend paid by companies at the end of the financial year 2024.
“Vedanta’s promoters need to clear their debt, so they announced the highest amount of dividend,” said Kranthi Bathini, equity strategist at WealthMills Securities Pvt. Ltd. “Certain group companies give out dividends because their promoters need money. They don’t say they need the money, they’ll say we want to reward our shareholders.”
Vedanta paid nearly ₹7,821 crore in dividends in the first quarter, and HZL paid close to ₹8,028 crore. The metals and mining major had announced in May that it plans to raise ₹8,500 crore through equity or debt.
Vedanta’s promoter Anil Agarwal made ₹6,800 crore via dividends in 2023-24. The company’s gross debt was nearly ₹71,760 crore as of March 2024, while its net debt was ₹56,334 crore as of 31 March 2024.
Vedanta’s promoter is not the only one making money through dividends. Cash-rich Tata Sons Pvt. led the race, with over ₹36,500 crore in earnings from dividends and share buybacks, according to reports by Business Standard. The Shiv Nadar family, which controls HCL Technologies, earned about ₹8,600 crore in 2023-24.
Vedanta Ltd, Hindustan Zinc, Tata Consultancy Services and HCLTech were among the top five companies that paid the most dividend in Q1, accounting for 64% of the total grant in the quarter.
Other than group companies, public sector undertakings also paid out large dividends. Two out of the next top five companies on the dividend chart were PSUs like REC Ltd and Power Finance Corporation Ltd.
“The PSU companies tend to declare the highest amount of dividends, coupled with certain corporate groups,” Bathini said. “They have given the highest dividend yield, which also led the entire dividend outflow to a five-year high.”
The multi-year high dividend payout came at a time when most companies recorded muted earnings. Their revenue growth slowed to a single digit for the first time in six quarters, Mint reported earlier. An analysis of 1,475 BSE-listed companies showed a 9% year-on-year rise in revenue and a modest 5% rise in net profit. A relatively higher base in the previous year, rising input costs, weak global demand and a lagging rural consumer market dragged the profits.
“If there are more private players who paid out dividends, it could be that they are not planning any further expansion, at least as of now,” Ajit Mishra, SVP of research at Religare Broking Ltd, said. “That is the reason they are compensating the investors.”
Mishra said, “If the company doesn’t perform, then dividends give some reason to stick to the company.”
While some companies gave out a bounty dividend in the first quarter, many held back this time. 176 companies paid dividends in the first quarter of this financial year compared with 302 in Q1FY23, 523 in Q1FY22, 532 in Q1FY21 and 601 companies in Q1FY20. That shows a declining trend in companies that give out dividends.
Companies in India find it hard to part with surplus cash, “they hold it to invest at a subsequent point of time when they undertake new business ventures or extend capacities,” said Sandeep Bagla, chief executive of Trust Mutual Fund. “I don’t like companies that keep piles of cash surplus which earns very little return for the shareholder.”
At a time when fewer companies have announced dividends, investors are advised to have a more balanced portfolio.
“I would prefer to invest in growth companies because India is a growth-oriented market,” Bagla said. “In terms of portfolio diversification, it would probably be a good idea to hold some dividend-paying company as well.”
