India’s dividend-disclosure dilemma: Meaningful reform or tokenism?

livemint.com:

Dividends are more than just a share of profits—they reflect a company’s commitment to shareholders and its approach to governance. Yet, balancing investor payouts with reinvestment for growth has always been a challenge. This debate has gained fresh relevance as India’s financial markets undergo a valuation correction amid sluggish economic growth. 

While long-term optimism about India’s trajectory persists, dividend-seeking investors are left wondering: Are companies truly creating long-term value by retaining earnings, or are they simply masking inefficiencies with self-serving projects?

Read this | Shareholders got record-high dividends in FY24. Will the trend continue?

Unlike some global counterparts, India does not mandate a fixed dividend payout ratio. Listed companies often justify withholding dividends by citing growth opportunities, but this raises concerns about corporate governance and the “agency problem," where managers prioritize interests other than shareholder returns.

According to SAHA, an Istanbul-based corporate governance and credit rating agency, India’s corporate governance reputation is subpar—comparable to countries like Brazil, Chile, and China. Ironically, while these nations enforce mandatory or semi-mandatory dividend policies, India’s more flexible approach has only fuelled investor frustration.

At the 2024 annual general meeting of Godfrey Phillips, shareholders questioned why promoter remuneration had doubled while dividend payouts shrank, highlighting concerns about companies hoarding cash rather than distributing profits.

To address this, India's markets watchdog, the Securities and Exchange Baord of India (Sebi) introduced a regulation requiring the top 500 firms to disclose the