Debt-funded dividends to reduce to 13% of the total dividend payout in FY 17-FY18, as opposed to the average of 22% between FY10-FY16, owing to greater profitability observed in 2015-16 which is expected to continue during FY17-FY18, according to India Ratings.
The ratings agency said that the top dividend paying corporates will pay close to Rs 90,000 crore as dividends in the FY17-FY18, out of which Rs 5800 crore will be funded by debt each year. This is in great contrast to the amount of Rs 9000 crore debt-funded dividend paid out between FY 14-FY16.
However, the agency maintains that the capital-intensive sectors like infrastructure, real estate, telecom and power that have historically accounted for 73% of the debt-funded dividends paid out by Indian corporates are going to repeat the trend in the new financial year too.
On the other hand, Indian metal and mining companies that saw a significant increase in profitability in the 9MFY17 may be able to slash their proportion of debt-funded dividend from 44% in FY16 to almost 1.4% by FY18.
Validating the above, in recent days, metals and mining companies have been seen as offering record dividends to their shareholders. While Hindustan Zinc, the cash cow of the Vedanta Group doled out Rs 27,157 crore in dividends for FY17, the board of the group itself approved of an annual dividend of Rs 6580 crore.