India Inc pays record dividends

Equity dividend payment rises 14.9 per cent in 2010-11.

Corporate India has been generous to itself this year. Dividend payout to shareholders for financial year 2010-11 has hit a new high at Rs 88,379 crore. Equity dividends paid out this year have increased by 14.9 per cent, a slower pace compared to the 17.5 per cent rise in net profit for the 1,099 dividend paying companies under review. Moreover, the dividend payout as a percentage of net profit has remained more or less unchanged at 25.55 per cent.

The big beneficiaries of this generosity were the promoters themselves. Indian promoters in the private sector received Rs 17,361 crore in 2011, marginally higher than in the previous year.

Three promoters got more than Rs 1,000 crore each. Mukesh Ambani, who holds 41.96 per cent in Reliance Industries through his family and privately-held companies, got Rs 1,095 crore equity dividend. Brijmohan Lall Munjal and his family, who hold 52.21 per cent in the country’s largest motorcycle company, Hero Honda, became richer by 1,095 crore. Azim Premji, who holds 79.28 per cent in Wipro through a family trust, received Rs 1,168 crore.

Sun TV promoter Kalanithi Maran got Rs 266 crore on account of his 77 per cent stake in the company. Among Infosys Technologies’ promoters, Narayana Murthy and his family got Rs 154 crore, Nandan Nilekani and family Rs 118 crore, S Gopalakrishnan and family Rs 117 crore, S D Shibulal Rs 61 crore and K Dinesh and family Rs 86 crore. Investor Rakesh Jhunjhunwala got Rs 38 crore from 16 companies in which he holds stakes.

The government of India, which has huge holdings in listed banks and other public sector undertakings, received Rs 5,856 crore, compared to Rs 1,714 crore in 2009-10. The listed government oil and gas companies, which are facing huge under-recoveries, paid Rs 8,690 crore. ONGC (Rs 5,550 crore) and IOCL (Rs 1,820 crore) were the major contributors. The listed banks, power and mining and metals companies paid over Rs 4,500 crore each.

Out of the 1,099 companies studied here, 427 paid more than last year, while 113 had paid no dividend in 2009-10. A total of 350 companies maintained the last year’s level while 209 thought it prudent to keep resources in hand and reduced the payout.

Dividends are tax-free in the hands of shareholders and hence cause a significant loss in income tax to the government. However, a domestic company paying dividend has to pay dividend distribution tax (DDT).

The rate applicable for 2010-11 is 15 per cent plus surcharge of 1.125 per cent, education cess of 3 per cent, totaling 16.61 per cent. So, these companies paid Rs 14,680 crore as DDT.