Securities market regulator SEBI’s decision to mandate India’s top 500 companies to formulate and disclose a dividend policy has been beneficial to investors, according to a report by shareholder advisory firm IiAS. It found that 91 of the top 100 companies have a publicly available dividend distribution policy, and of these, 15 companies are likely to distribute a higher share of their profits as dividend.

On cash pile

Indian companies have been hoarding cash, with cash (including liquid investments) on S&P BSE 500 companies’ balance sheets on March 31, 2016 aggregating to ₹16.7 lakh crore. These companies, in FY16 announced aggregate dividends of ₹1.8 lakh crore.

IiAS’ February 2017 analysis showed that despite this, conservatively, 88 of these companies could, in aggregate, pay out over ₹25,000 crore more in dividends. Some of these companies returned cash to shareholders via buybacks in FY17 — the largest of these were undertaken by State-owned enterprises and TCS.

Bajaj Auto, Dabur, Dr Reddy’s Laboratories, HDFC Bank, Idea Cellular and Tata Steel are among those that made higher dividend payouts.

Bajaj Finserve, ICICI Prudential Life Insurance and Tata Motors have rationalised their payouts.

Dividend policy

In its new policy, the market regulator has asked companies to include certain information in the dividend policy. These include the circumstances under which the shareholders of the listed entities may or may not expect dividend, the financial parameters that shall be considered while declaring dividend, internal and external factors that shall be considered for declaration of dividend, policy as to how the retained earnings will be utilised, and, parameters that are to be adopted with regard to various classes of shares.

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