PSUs ARE RUNNING OUT OF STEAM OVER DIVIDENDS

The Union government may have to settle for lower dividend income from public sector undertakings( PS Us) in the next fiscal year, as most large companies have already paid hefty interim dividends during the first 11 months of the current fiscal year. Moreover, some state-owned companies dipped into their cash reserves to make payments in 2017-18. Analysts said these two instances left little room for PS Us to step up dividend payment in the next fiscal year .“Indian Oil and Oil and Natural Gas Corporation( ON G C) have been very generous with their dividend payouts in the current fiscal year, in line with a sharp rise in their profitability due to lower crude oil prices. This upside may not be present next fiscal year as crude oil prices are rising and electoral compulsions may force oil PS Us to defer raising fuel prices ,” said D han an jay Sin ha, head of research, Em kay Global Financial Services. Oil and gas PS Us such as Indian Oil, ONGC, B ha rat Petroleum, Hindu stan Petroleum, and GAIL( India) have paid ~328 billion as interim dividend during the first 11 months of 2017-18,22 percent higher than their full-year dividend in 2016-17. KRISHNAKANT writes

The Union government might have to settle for lower dividend income from public sector undertakings (PSUs) in the next financial year, as most large companies have already paid hefty interim dividends during the first 11 months of the current fiscal year. Moreover, some state-owned companies dipped into their cash reserves to make payments in 2017-18.

Analysts said these two instances left little room for PSUs to step up dividend payment in the next fiscal year.

“Indian Oil and Oil and Natural Gas Corporation (ONGC) have been very generous with their dividend payouts in the current fiscal year, in line with a sharp rise in their profitability due to lower crude oil prices. This upside may not be present next fiscal year as crude oil prices are rising and electoral compulsions may force oil PSUs to defer raising fuel prices,” said Dhananjay Sinha, head of research, Emkay Global Financial Services.

Oil and gas PSUs such as Indian Oil, ONGC, Bharat Petroleum, Hindustan Petroleum and GAIL (India) have paid ~328 billion as interim dividend during the first 11 months of 2017-18, 22 per cent higher than their full-year dividend in 2016-17. Indian Oil topped the dividend list with a total interim dividend payout of ~184 billion, more than twice its full-year dividend in 2016-17. (See chart)

Overall, 18 non-financial central PSUs (CPSUs) have together declared ~506 billion worth of interim equity dividend during the current fiscal year, about 45 per cent more than the dividend paid by all 36 non-financial CPSUs during 2016-17. Non-financial PSUs had paid equity dividend of around ~350 billion last fiscal year.

This cushioned the blow from a sharp cut in the dividend payout by the Reserve Bank of India (RBI) in 2017-18, down nearly 50 per cent from a year ago, which experts attributed to an increase in costs due to demonetisation. “The next year is likely to be normal for the RBI and it may restore its dividend payout to its previous level. This should cushion a likely shortfall in dividend from commercial enterprises such as oil marketing companies and banks,” added Sinha.

The RBI is the single-largest source of dividend for the government, followed by energy firms such as Coal India and power utilities companies such as NTPC and Power Grid Corporation.

This is the second successive year of a sharp rise in dividend payout by oil CPSUs. In 2016-17, the combined dividend payout by oil PSUs was up 355 per cent, while non-oil PSUs reported a 20 per cent decline, year on year. So far, oil PSUs account for twothirds of all dividends paid by non-financial PSUs in 2017-18, against 44 per cent in 2016-17 and 12 per cent in 2015-16.

Analysts said oil PSUs could find it difficult to raise dividend payouts next year. “A fall in international crude oil prices provided an earnings bonanza for state-owned oil marketing companies and the government gained through hefty dividends. This bonanza may now dissipate, given the rise in crude oil prices in the last 12 months and the companies’ high dividend payout ratio,” said G Chokkalingam, managingdirector, Equinomics Research & Advisory.