Dividend by top 10 payers more than doubles in FY23; TCS tops the table

Tata Consultancy Services (TCS), the group’s biggest cash generator, overtook Vedanta to become the highest dividend payer in India in FY23. The IT services major paid Rs 42,090 crore for FY23, up 167.4 per cent from Rs 15,738 crore for FY22.

The 10 biggest payers together shelled out Rs 2.06 trillion for FY23, more than double the Rs 98,371 crore for FY22.

In comparison with TCS, mining and metal producer Vedanta was on top of the dividend league table for FY22 with Rs 16,681 crore. Vedanta is the second-highest payer for FY23 with Rs 37,758 crore, up 126.4 per cent on a year-on-year (Y-o-Y) basis.

It is followed by Hindustan Zinc with a payout of nearly Rs 32,000 crore, Coal India (Rs 20,491 crore), and ITC (Rs 15,846 crore). Hindustan Zinc is 65 per cent owned by Vedanta and as such a significant portion of dividend payout by the latter is nothing but its dividend income from its subsidiary.

The analysis is based on annual dividend payouts by a common sample of 1,075 listed firms that are part of the BSE 500, BSE Mid-cap and BSE Small Cap indices.

These companies together paid a record dividend of Rs 3.94 trillion for FY23, up 32.1 per cent Y-o-Y over the Rs 2.98 trillion in FY22.

In comparison, these companies’ combined net profits were up 5 per cent Y-o-Y to Rs 10.95 trillion in FY23. (See the adjoining charts.)

The final dividend payout by India Inc for FY23 is expected to grow because many big companies such as Reliance Industries, JSW Steel, Gail (India), and Bharat Petroleum Corporation are yet to declare it.

There were two entrants to the top 10 list for FY23 — HDFC Bank and State Bank of India. HDFC Bank became the eighth-biggest with Rs 10,601 crore, as against Rs 3,592.4 crore a year earlier, when the bank, the biggest in the private sector, was the 23rd highest.

State Bank of India (SBI) jumped one place to 10th rank in FY23. It paid Rs 10,085 crore, up 59.2 per cent from the Rs 6,337 crore a year earlier.

SBI’s net profit was up 57.3 per cent Y-o-Y in FY23.

Other big payers for FY23 include Oil & Natural Gas Corporation (Rs 14,153 crore), HCL Technologies (Rs 13,032 crore), and Power Grid Corporation (Rs 10,289 crore).

The big jump was largely due to a rise in the payout ratio rather than faster growth in net profit. The combined net profits of the top 10 were up 11.8 per cent Y-o-Y to Rs 2.78 trillion in FY23 from Rs 2.49 trillion a year earlier. As a result, these companies distributed 74.2 per cent of their net profits in FY23 as dividend, up from 39.6 per cent a year earlier.

Vedanta was the most generous in that its payout in FY23 was more than three and a half times its net profit. At the other end of the spectrum, SBI had the lowest payout ratio at 18.1 per cent.

A big rise in the payout ratio usually means a decline in companies’ retained earnings, which reduce their ability to fund capex and growth through internal accruals. A payout ratio of more than 100 per cent means the company has dipped into its cash reserves to pay dividends.

“Large dividend payouts by top companies mean they are more keen to keep their shareholders happy in the current circumstances rather than retain profits to fund capex,” said Dhananjay Sinha, head, equity and research, Systematix Institutional Equity.

However, this is in step with the trend seen in the last 10 years.