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Sun TV Network’s conservative dividend policy came in for severe criticism in an analysts’ call hosted by the Chennai-based company to deliberate on its Q4 and FY21 performance last week. Even as it is sitting on a cash pile of ₹3,800 crore, the company did not announce any final dividend for the year.
Sun TV had declared ₹5 as an interim dividend in February for fiscal 2021.
Enam AMC’s Jiten Doshi questioned the company for changing its dividend policy, when compensation of promoters such as salary and perks remain unchanged.
Explaining the rationale behind the low payout, the Sun TV management said: “In the last 12 months, we saw an extreme volatility in the business, and we thought by March everything will be over because we saw from December to March a fairly good uptick in ad revenues. But then suddenly towards the end of the quarter and at the beginning of June quarter all kinds of volatility arose due to the second wave; so we want our company to be on safe ground.”
When Doshi pressed further on whether the company would consider a buyback plan to distribute the free cash, the management said that it had two mega projects lined up with estimated investments of ₹1,200 crore.
According to Emkay Global, the steep reduction in dividend payout to 13 per cent vs average of 49 per cent over the last five years, despite high cash and cash equivalents was a key negative for the stock.
‘No aggresive movie buys’
Sun TV also said it was not planning aggressive movie acquisitions for OTTs, like other players, which have borne the brunt of sub-optimal returns.
According to analysts, Sun TV’s is not an isolated case. Many companies are not willing to distribute cash surplus to shareholders despite the Securities and Exchange Board of India’s dikat to the top 1,000 companies to formulate a dividend policy and disclose it.
An analyst with a Mumbai-based brokerage firm said Sun TV promoters hold 75 per cent stake in the company. Besides, close family acquaintances -- Selvi Selvam and Shanmugasundaram Selvam -- have 2.5 per cent stake and bodies corporate another 1.9 per cent.
Even if Sun TV announces liberal dividend, the cash will just flow from one pocket to another, as retail investors will receive a mere 3 per cent, he said. FPIs and MFs hold 8.98 per cent and 4.05 per cent stake in the firm.
Though there is no actual governance issue here, as return on equity comprises both distributed and undistributed cash flow, what irks analysts is the inconsistency in the dividend policy.
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