Balancing Act: With greater capex comes lower dividend
India Inc was less generous with dividends in FY24 than in previous 9 years amid an increase in capital expenditure with average capacity utilisation exceeding the long-term average. The dividend payout ratio was 34% in FY24, down from 43% in FY23 and 37% in FY22. Including buybacks, the payout was 38% in FY24 compared with 44% in FY23 or 41% in FY22.
The dividend payout ratio is the proportion of a company's earnings paid to shareholders as dividends. This payout tends to be lower in times when companies spend more on expansion. Companies with a high cash flow in mature industries tend to have higher dividend payout ratios. About 1,300 companies paid ₹4.15 lakh crore in dividends in FY24, compared with their standalone net profit of ₹12.24 lakh crore. Additionally, 41 companies spent around ₹50,750 crore on share buybacks in FY24. The dividends paid in FY23 amounted to ₹4.44 lakh crore, while money spent on share buybacks was ₹21,500 crore.
According to analysts, investments in several new projects are gaining momentum, with companies allocating more funds toward expansion. «After a long time, there is an uptick in capital expansion across many industries in India,» said Gaurav Dua, head of capital market strategy, Sharekhan.
What Top 15 Groups Paid
«Consequently, it is not surprising to see a decline in dividend outgo as the money would be required to fund the expansion,» Dua said.
The top 15 industry houses in India paid an average of 43% of their profits as dividends in FY24, significantly lower than the 75%
