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Institutional EYE

Commentary on Corporate Governance Issues

Dividends: 92 companies can pay Rs.340 bn more

Despite a muted earnings growth in FY17, Indian companies can pay higher dividends from their existing cash piles. IiAS’ research has identified 92 of the S&P BSE 500 companies hold about Rs.1.85 bn in aggregate cash and cash equivalents – of which, conservatively, almost Rs.340bn can be paid out in incremental dividends. SEBI’s mandate to the top 500 companies for an articulated dividend policy has helped to some extent, but cash hoarding continues to plague listed companies in India.

Indian companies continue to maintain large cash balances. IiAS’ study based on FY17 financials shows that there are at least 92 companies that can potentially return cash to its shareholders in the form of dividends or buybacks.

The key conclusions of the study are:

  • These 92 companies paid Rs.407 bn as aggregate dividend in FY17 and can additionally pay Rs.339 bn.

  • Five companies – MRF Ltd, 3M India Ltd, ISGEC Heavy Engineering Ltd, Honeywell Automation India Ltd and Bosch Ltd - can pay dividends of over Rs.100 per share.

  • Seven companies can pay between Rs.50 and Rs.100 per share as dividends.

  • Of the 92 companies, the top four companies aggregate over 50% of the total incremental dividend of Rs.339 bn. All four were information technology companies.

  • Of the companies identified, 54 companies appeared in our last 2017 study as well. While 36 of these have increased dividend payout over FY16, they can still pay out more.

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