Companies can provide more dividends: Study

Firms need new plans on dividends and not just Sebi requirements

Sebi’s requirement on the need for companies to think more deeply on dividend payouts, has still to be met by at least 88 companies.

A study based on FY2016 financials, by proxy advisory firm IiAS, revealed that 88 companies paid `278 billion as aggregate dividend in FY16 and can additionally pay `276 billion.

They have aggregate cash and cash equivalents of `1.9 trillion as on March 31, 2016.

In the case of Whirlpool of India Limited (Whirlpool) the company has not paid dividend in the past four years though IiAS estimates that Whirlpool has `2.4 bn in excess distributable cash.

Of the 88 firms, IiAS found that the top seven companies — MRF Ltd, Eicher Motors Ltd, 3M India Ltd, Bosch Ltd, Maruti Suzuki India Ltd, ISGEC Heavy Engineering Ltd and Honeywell Automation India Ltd — can pay dividends of over `100 per share while 10 of them can pay dividend between `50 and `100 per share.

Many companies were pushed to paying more dividend due to regulatory and tax-related changes.

In the annual budget announced on February 29, 2016, for instance, an additional 10 per cent tax was levied on individual investors and partnerships with aggregate dividend income over `1 crore per annum, effective April 1, 2016.

Before the new tax structure could kick in, several companies rushed to pay interim/special dividends.

IiAS said their study of the S&P BSE 500 companies indicated that 107 companies announced and paid interim/special dividends aggregating to `148.1 billion in March 2016.

In contrast, a mere six companies paid `11.7 billion in March 2015.

In the 2017 Union Budget, the additional tax was extended to private trusts.