Hindalco Industries has decided to pay 8-10 per cent dividend from the consolidated free cash flow against its existing policy of paying 10-30 per cent of the standalone net profit. The move will lead to higher payout as it will now consider the free cash flow of its US subsidiary Novelis while distributing dividend.
Moreover, it said dividend will be declared out of the profits of that financial year or previous financial years after providing for past depreciation. This is in contrast to the existing policy which provides for paying dividend only from the existing year’s standalone net profit and the retained earnings were to be utilised only in exceptional circumstances.
The free cash flow is an amount generated after meeting interest, tax, other statutory dues, maintenance capital expenditure and working capital requirements at Hindalco consolidated level but before considering strategic capital expenditure and debt payments of the relevant year, it said.
Before deciding on dividend, the board will consider various internal and external factors including stability of earnings, future capital expenditure, inorganic growth plans and reinvestment opportunities, industry outlook and stage of business cycle for underlying businesses, leverage profile and capital adequacy metrics, overall economic and regulatory environment, contingent liabilities, past dividend trends, buyback of shares or any such alternative profit distribution measure and any other contingency plans, it said.
The company will announce its capital expenditure plans separately in the coming weeks.