Firm to give out record cash reward

Tata Sons likely to net nearly ~22,000 crore from its crown jewel for the past financial year

Tata Consultancy Services, with its final dividend for FY21 of ~15 per share announced on Monday, will make the biggest ever cash reward to its shareholders in a financial year. KRISHNA KANT writes

Tata Consultancy Services, the Tata group cash cow and India’s largest IT services company, will make another record this year.

With its final dividend for FY21 of ~15 per share announced on Monday, TCS will make the biggest ever cash reward to its shareholders in a financial year.

Together with its share buyback worth ~16,000 crore completed in January this year, TCS shareholders will receive a record ~30,250 crore from their company in FY21.

The company is paying total equity dividend of Rs 38 per share translating into total pay-out of around ~14,000 crore for FY21. This is likely to make TCS the country’s top dividend payer for second-year in a row.

This way, TCS will break its FY20 record when it returned nearly ~27,400 crore to its shareholders by way of equity dividend, becoming the top dividend payer in the country.

It was followed by ITC, which had paid around ~12,500 crore as equity dividend to its shareholders (see the adjoining chart).

With its latest pay-out, TCS has returned a record ~1.2 trillion to its shareholders in the last five years and ~1.6 trillion in the last 10 years.

In FY20, TCS accounted for nearly 15 per cent of the dividend paid by the listed companies in the country.

Tata Sons will earn nearly ~22,000 crore from TCS by way of dividend and share buyback, given its 72 per cent stake in the company.

The latest cash bonanza from TCS will provide a boost to Tata Sons’ profitability and balance sheet in FY21.

The holding company has been forced to raise loans in recent years to provide equity support to large group companies and fund losses of the group telecom and aviation business.

The Tatas have also forayed into e-commerce by acquiring Big Basket and the cash from TCS will come in handy to fund the initial losses suffered by the e-commerce venture.

Some analysts, however, worry that a large pay-out by TCS will deplete its cash reserves, which could restrict its financial headroom and reduce its ability to grow and enter new segments by way of large acquisitions.

The worry stems from a steady slowdown in the company’s revenue and profit growth in recent years.