It’s raining dividends from India Inc

The liberal dose of dividend payouts have, of course, to do with the pleasing performance of Corporate India — bottomlines of most companies have shown a 15-20 per cent growth this year. “When there is a rise in cash yields, companies tend to distribute it among their shareholders. For shareholders, 2005 was a good year. I expect this trend to continue in the next two years… there will be a 15-20 per cent rise in EPS (earning per share),” said Pradeep Chohani, head of research, Angel Stock Broking.

Take, for example, Reliance Industries, the largest private company with a huge shareholder base of 2.3 million. The company hiked dividends from 52.5 per cent to 75 per cent in 2005. This means the company paid Rs 1,195 crore to its shareholders as dividend against Rs 824 crore in the previous year.

Obviously, this increased payout was possible due to the steep rise in the company’s profit. Reliance’s profit shot up 47 per cent to Rs 7,572 crore for 2004-05.

Similarly, other companies like SBI, ICICI Bank and a host of PSUs came out with better dividends for the year. Tata Steel hiked the dividend from 100 per cent to 130 per cent, leading to a higher payout of Rs 821 crore as against Rs 416 crore.

Incidentally, the government is a big beneficiary of this ‘generosity’. Being a big stakeholder — holding between 51-85 per cent in most listed PSUs — the government coffers have overflown in 2005.

The 74.14 per cent it holds in ONGC is a case in point. The government got a whopping Rs 4,804 crore out of the total dividend payout of Rs 6,480 crore made by the oil major. Similarly, of the Rs 2,247 crore dividend announced by NTPC for 2005, the government received Rs 2,011 crore due to its 89.50 per cent stake in the power generation company.

But how long will this trend continue? “Some of the sectors like metals, petrochemicals and energy are going in for huge capital expenditure programmes. So companies in these sectors may not be as liberal as they were last year,” said Nandan Chakraborty, head of research, Enam Financial.

Analysts agree that the dividend show will last only till the robust performance of the corporate sector continues. But as nobody is talking about a recession in the industry now, nobody’s complaining.