India Inc. paid record dividends in FY21 despite tough Covid time, all thanks to earnings due to low-interest rates, cash flow, and recovery in better balance sheets. The equity dividends have been paid by the top 155 of NSE 200 companies in FY21 compared to FY20 it jumped 38 percent or Rs 61,000 crore.
With suppressed demand after the lockdown led by Covid last year, the profitability growth of companies has been high. He adds that companies have been reporting good profit numbers since the September 2020 quarter, which was also repeated in the quarters December 2020 and March 2021.
PSUs like NTPC, Indian Oil, BPCL, HPCL, SBI, SAIL, and Coal India contributed the maximum to dividend kitty in FY21. Private companies Hindustan Unilever, Infosys, Ambuja Cement, Britannia, Tech Mahindra, and L&T have seen significant dividend growth for this period.
Cost reduction efforts and strengthening working capital requirements helped firms, especially older people, to report better income. While the fall in interest rates has benefited the profitability of companies, large groups have taken better market share to the corners. It drove strong profitability, enabling better dividend payments. While managing the costs of large companies, it was difficult for small companies.
Nifty for 500 companies had a profit of Rs 2.20 lakh crore in the December 2020 quarter and will be even higher in the March quarter, says Shah. State-owned oil marketing company Bharat Petroleum declared a record dividend of Rs 17,137 crore in FY1, while Rs 3,245 crore was paid in FY20. The sale of its 61.5 percent stake in Assam’s Numaligarh refinery gave the firm Rs 9,876 crore.
Consumer major Hindustan Unilever, whose net profit has increased by 18 percent to Rs 7,995 crore in FY21, disbursed Rs 9,518 crore as against Rs 5,400 crore paid in FY20. IT Criterion Infosys paid Rs 27 per share in FY21 as compared to Rs 17.50 in FY21; In terms of the amount paid, there has been a 54 percent increase – from Rs 7,452 crore to Rs 11,502 crore. Similarly, Ambuja Cement increased its payment for the year ended December 2019 from Rs 298 crore to Rs 3,574 crore in December 2020.
According to analysts, companies see no reason to save money for capital expenditure in a demand-hungry economy. There is no re-investment cycle with the slowdown in the economy, says Ramdev Agarwal, chairman of Motilal Oswal Financial Services.