Following Finance Minister Arun Jaitley’s call to pay 30 per cent annual dividend, five public sector companies — BPCL, Bharat Electronics, NTPC, Powergrid Corporation and Oil India — have announced their plans to consider dividend before end of next month.
₹800 cr from BPCL, OIL The Centre will receive ₹800 crore as dividend from BPCL and Oil India which have announced dividends of ₹12 and ₹8 a share, respectively. While BPCL plans to pay ₹477 crore by February 3, Oil India would shell out ₹325 crore before February 10.
More public sector companies are expected to fall in line following announcement of their December quarter results in the coming months. The decision on dividend payout will help the Centre shore up its financials to meet the uphill task of retaining the fiscal deficit target at 3.9 per cent of GDP. According to the Budget Estimates for 2015-16, public sector entities are expected to pay dividend of ₹36,000 crore.
Jaitley recently said Central Public Sector Enterprises should pay an annual dividend of 30 per cent of net profit or 30 per cent of the Centre’s equity holding, whichever is higher. Paras Bothra, Vice-President, Ashika Stock Broking, said it may be a huge positive for retail investors if these companies, which generate consistent cash flows despite challenges in their business, can maintain the dividend track record over a period of time. “PSU stocks may get re-rated. While maintaining the dividend track record, they should also ensure that the future growth opportunity is not missed out by cutting down on their capital expenditure,” he added.
The dividend policy will extend a helping hand to the government, particularly when it is staring at a shortfall of ₹50,000 crore in its disinvestment target.
PSU banks may keep away
Incidentally, the Supreme Court recently restrained the Centre from proceeding with the disinvestment of its minority stake in Hindustan Zinc, controlled by Vedanta.
With the fall in direct tax collection and low disinvestment receipts, the Centre may not receive much dividend from PSU banks this year as they conserve precious capital to make provision for soaring bad loans and raise their net worth to meet the Basel-III norms.
According to existing norms, public sector banks are required to pay a dividend of 20 per cent of the paid-up equity capital or net profit to the Centre. They had paid ₹4,000 crore as dividend last fiscal. This fiscal, they are expected to pay ₹10,277 crore.
Gross non-performing assets of PSBs increased 25 per cent in the September quarter to ₹3.14 lakh crore from ₹2.5 lakh crore registered in the same period last year due to the stress in the economy, especially in the metal and infrastructure sectors.