Listed CPSUs to pay record Rs 1.26 trillion equity dividend for FY24

State-run entities will distribute 26.8% of net profit as equity dividend in FY24 - lowest payout ratio in at least a decade

Led by a sharp surge in payouts by oil-marketing companies and public-sector lenders, including banks and Life Insurance Corporation, central public-sector undertakings (CPSUs) will fork out an all-time high equity dividend of around Rs 1.26 trillion in FY24, up 28.7 per cent from around Rs 97,750 crore in FY23.

This includes the interim dividend paid by listed CPSUs in the first three quarters of FY24.

Nearly 60 per cent of this dividend will go to the central government as the promoter’s share. As a result, the central government is expected to earn Rs 76,166 crore, up 28.2 per cent from the Rs 59,406 crore in FY23. With this, in the last five years, dividend payment by CPSUs has increased at a compound annual growth rate (CAGR) of 19.2 per cent while the government share in the kitty has grown at a CAGR of 18.9 per cent in the period.

The government stake in various CPSUs ranges from a low 51.1 per cent in NTPC to as high as 98.25 per cent in Punjab & Sind Bank.

Record high dividend from listed CPSUs in FY24 will be a double bonanza for the Budget after it got nearly Rs 2.11 trillion from the Reserve  Bank of India (RBI). The Interim Budget, presented in February this year, had projected dividends and profit receipts of Rs 1.54 trillion from public-sector enterprises, including the RBI, according to Revised Estimates. The government had earned Rs 99,913 crore as dividends and profits in FY23.  Refiner Indian Oil Company (IOC) is the biggest dividend payer in FY24 -- paying Rs 16,945.5 crore to its shareholders in FY24 — up 300 per cent from its FY23 payout. It is followed by Coal India (Rs 15,715 crore), Oil & Natural Gas Corporation (Rs 15,411 crore), and Power Grid Corporation (Rs 10,463 crore).

More than half (56.2 per cent) the dividend payout in FY24 is accounted for by the big five payers, while the 10 biggest take care of 77.5 per cent. In all, 42 of the 60 listed CPSUs in the Business Standard sample have declared dividend for FY24, down from 47 in FY23 and 44 in FY22.  

The analysis excludes listed entities such as Hindustan Petroleum Corporation, Mangalore Refineries & Petrochemicals, REC, Petronet LNG, Indraprastha Gas, SBI Cards, SBI Life Insurance, and IDBI Bank that are owned and promoted by other CPSUs with no direct government stake.

According to the analysts, this will help the government in its fiscal consolidation effort and result in a lower overall fiscal deficit than that projected in the Budget. This may lower the yields on government bonds, which is a positive development for asset prices such as equities.

In comparison, the combined adjusted net profits of 60 listed CPSUs in the sample were up 40.2 per cent to record a high of Rs 4.69 trillion in FY24, up from the Rs 3.35 trillion a year earlier.

As a result, the CPSUs will distribute 26.8 per cent of their net profits as equity dividend in FY24, down from the 29.2 per cent in FY23.

These CPSUs’ combined net sales (gross interest income in the case of lenders) were, however, up only 2.6 per cent Y-o-Y in FY24 to Rs 44.8 trillion, growing at the slowest pace in the last three years.