Aggregate payouts are expected to go down marginally, courtesy public sector undertakings, technology and fast moving consumer goods companies.
The aggregate dividend payout by corporate India may be marginally lower in this financial year compared to the previous one, despite an estimated sharp slowdown in overall earnings. (Click here for detailed table CASH COWS ALL)
A study by the Business Standard Research Bureau estimates the total dividend payout at Rs 51,500 crore in 2008-09 compared to Rs 52,150 crore in 2007-08.
| FIRMS LIKELY TO PAY THE MOST | |||
| (In Rs) | DPS 2007-08 | Interim-FY09 | *Est DPS |
| Amrutanjan | 7.00 | 45.00 | 169.20 |
| Navin Fluorine | 4.00 | 5.00 | 25.40 |
| Tech Mahindra | 5.50 | 4.00 | 17.20 |
| Guj Reclaim Rub | 13.50 | 5.00 | 22.90 |
| Infosys Techn | 33.25 | 10.00 | 42.10 |
| Coromandel Fert | 3.50 | 6.00 | 11.30 |
| Ramco Ind | 15.00 | 10.00 | 22.60 |
| Jolly Boards | 20.00 | 2.50 | 27.00 |
| Selan Explor | 1.50 | 1.50 | 7.70 |
| Page Inds | 10.00 | 14.00 | 14.60 |
| * Estimated for FY 2008-09 DPS: Dividend Per Share | |||
India Inc’s profit for the nine-month period ended December 2008 has fallen 15 per cent from the corresponding period of the previous year, and analysts expect the same trend to continue in the fourth quarter as well.
The Research Bureau study covers 1,320 companies that paid dividends in 2007-8. Of this, 502 companies are expected to step up dividends, while 653 may propose to snip it. As many as 158 companies are likely to skip payouts as they showed net loss in the nine months ended December 2008. Their performance is not expected to improve much in the fourth quarter.
But if dividends are going to be just a tad lower than the previous year, thank the public sector giants and the private sector technology and fast moving consumer goods (FMCG) companies. Ninety-five of these firms have already distributed interim dividends of Rs 11,326 crore in the first nine months.
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The dividend outgo for PSUs, including nationalised banks, oil & gas and engineering companies, is expected to be higher at Rs 24,201 crore from Rs 22,116 crore paid in the previous financial year. Eleven PSUs, including Oil and Natural Gas Corporation (ONGC), National Thermal Power Corporation (NTPC) and Steel Authority of India (Sail), have already paid interim dividends of Rs 8,429 crore.
Banks are expected to increase their dividend payout for 2008-09 at least by Rs 1,000 crore over the previous year’s payout of Rs 6,500 crore. While the corporate sector as a whole has reported a decline in net profit during the first nine months, banks have reported a 20 per cent growth, thanks to treasury profits.
Despite providing for mark-to-market (MTM) losses due to currency fluctuations, software services companies are expected to give higher dividends this year. The increase in payout is likely to be in the region of Rs 1,000 crore.
Among other sectors, FMCG, fertilisers, chemicals, and pharmaceuticals companies are likely to pay higher dividends.
However, companies from realty, infrastructure, automobile, auto ancillaries, media and a host of other small and medium enterprises are likely to either reduce or skip dividends this year.
While 653 companies reported reduced net profit during the nine months, 602 firms had actually registered a growth in net profit. The remaining seven companies in the sample maintained their first nine-month performance and are likely to pay similar dividends as last year.
The assumption that companies with net losses in the first nine months may skip dividend is based on the fact that they will not have distributable profits. The analysis shows that only five loss-making companies paid dividend in 2007-08 by digging out reserves and surplus.
The companies that have reported reduced net profits in the nine months are expected to maintain the payout ratio of 2007-08. If they do so, then the 653 companies with nine months’ net profit of Rs 97,667 crore may distribute dividends of Rs 18,252 crore for 2008-09. These companies paid dividends of Rs 23,043 crore in 2007-08 out of a net profit of Rs 126,711 crore. Given the state of the stock market and the economy, there is every reason to believe that more companies will reduce or eliminate their payouts.
The 502 companies with strong nine-month performance are expected to pay dividends of Rs 33,252 crore, of which they have already paid Rs 8,654 crore in the interim. These firms had paid Rs 27,115 crore out of a net profit of Rs 97,930 crore in 2007-08. Most of these companies hail from FMCG, pharmaceuticals and banking sectors. Traditionally, these sectors are safer bets in an economic downturn as they provide essential products and services.
The slump in corporate earnings has affected dividend payouts with only 95 firms declaring interim dividends in the first nine months of this financial year compared with 144 in the corresponding period last year. Only 60 companies paid interim dividends both in 2008-09 and 2007-08. So, 35 new companies entered the interim payout list this year. The remaining 84 companies, which had paid interim dividends last year, have not yet proposed to pay this year.
The companies which have decided to stay away from interim dividends are mostly from the real estate, non-banking finance and pharmaceutical sectors. DLF, Wipro, Larsen and Toubro, Sesa Goa, Gujarat Flurochemicals and Manugraph India, which paid over 100 per cent interim dividends in 2007-08, have stayed away this time around. With high debt levels likely to weigh on the companies for many years, equity investors at best are expecting economic recovery on account of interim simulative packages that will increase corporate earnings in 2009-10. Now, capital gains are a distant memory. And, it is becoming harder to imagine stock prices zooming again anytime soon.
Even in this environment, a few companies may increase dividend payouts. ONGC, Infosys Technologies, SBI, Punjab National Bank, Hero Honda, Monsanto India, Colgate Palmolive, ICI, Coromandel Fertilisers and LIC Housing Finance are expected to raise dividend payouts this year. The companies that are likely to prune dividends this year on account of lower profits are Reliance Industries, Larsen & Toubro, Bharat Heavy Electricals, Bajaj Auto, Sesa Goa, Grasim Industries, Tata Power, Tata Motors, Tata Chemicals, Indiabulls, DLF and Mahindra & Mahindra. Companies that are expected to skip paying dividends include BPCL, Bongaigaon Refineries, Finolex Cables, HPCL, Orchid Chemicals and Suzlon Energy.