Dividend drive turns automobile promoters richer by Rs 39 billion in FY18

The biggest dividend income in the sector is earned by Japan's Suzuki, which holds a 56% share in Maruti Suzuki

Promoters of the country’s top automobile companies are laughing all the way to the bank. Data shows that promoters of eight leading firms, including Maruti Suzuki, Bajaj Auto and Hero MotoCorp, earned a record dividend income of Rs 39 billion in FY18, an increase of 14 per cent over the previous year as businesses made more profits.

A higher dividend announcement following better financial performance is meant to reward shareholders. Promoters, who are often majority shareholders, end up gaining as well. The biggest dividend income in the sector is earned by Japan’s Suzuki, which holds a 56 per cent share in Maruti Suzuki. The country’s biggest carmaker announced a record dividend of Rs 80 per share for FY18 compared to Rs 75 declared for FY17. Accordingly, Suzuki earned a dividend income of Rs 13.58 billion in FY18 vis a vis Rs 12.73 billion in the previous year.

The Bajaj family, which promotes two- and three-wheeler maker Bajaj Auto, earned a handsome Rs 8.56 billion in dividend income during FY18. This is a growth of over nine per cent compared to the previous year. The firm made a record profit of Rs 40.68 billion last year.

The promoters of the country’s top two-wheeler firm Hero MotoCorp saw close to 12 per cent growth in dividend income last year. The Munjal family earned Rs 6.57 billion in dividend as promoters last year against Rs 5.88 billion during FY17. In all the above three cases, the companies are debt-free and do not have a major capex lined up. This allows the management to reward shareholders with attractive dividends while following the dividend policy.

The promoters of the country’s biggest automobile component maker, Motherson Sumi, earned a record dividend income of Rs 2.92 billion for FY18 against Rs 1.77 billion in the previous year, a growth of 65 per cent. Interestingly, Vivek Chaand Sehgal, who founded the company along with his mother (which explains the name Motherson) does not take a single rupee as remuneration from the company. Sehgal is the promoter and chairman. His son, Laksh Vaaman Sehgal, a director, does not get any remuneration either.

The Hinduja family, promoters of commercial vehicle major Ashok Leyland, also saw their dividend income surge 65 per cent in FY18 to Rs 2.84 billion as the company improved its profit to a record Rs 15.62 billion. Accordingly, a dividend of Rs 2.43 per share was declared for FY18 against Rs 1.56 in the previous year.

The promoters of Eicher Motors and M&M earned dividend income of Rs 1.90 billion and Rs 1.51 billion last year, respectively. The promoters of TVS Motor Co saw their dividend income grow 32 per cent to Rs 0.90 billion in FY18.

The outlook for profitability and volume growth for most of these companies is positive in the current financial year as well and for shareholders, including promoters, this could turn out to be another year of high rewards.