Debt-funded dividend payouts to fall 1/3 as bottomline betters

Indicating improving profitability, India Inc's dividend payout through debt is likely to slip to Rs 5,800 crore in the current financial year from average of Rs 9,000 crore seen between 2014-15 and 2015- 16, says a report.
According to an estimate by India Ratings, the top dividend paying companies would pay Rs 90,000 crore in dividends in 2016-17 and 2017-18, of which around Rs 5,800 crore would be debt-funded each year. This, however, is lower than average Rs 9,000 crore they borrowed to pay dividends between 2014-15 and 2015-16.
"We estimate that funding of corporate dividends by borrowings is on a decline because of improving profitability," India Ratings said in a report today.

The improvement is attributed to the improved profitability seen in 2015-16, which is expected to continue going forward.
"The quantum of debt-funded dividends as a proportion of total dividends paid between 2016-17 and 2017-18 may come down to 13 per cent from 22 per cent between 2009-10 and 2015 -16," the report said.
The agency analysed 65 corporates, which accounted for 85-88 per cent of the total dividends paid in each year between 2009-10 and 2015-16.

It observed that the capital intensive sectors such as infrastructure, real estate, telecom and power have historically accounted for 73 per cent of the debt-funded dividend payments.

"We expect this trend to continue in 2016-17 and 2017 -18," the report added.
"Auto, telecom, infrastructure, power and real estate, which accounted for 42 per cent of the total debt-funded dividend payouts between 2009-10 and 2015-16, are expected to account for 77 per cent by 2017-18," it said.