Vedanta Powers India Inc’s Q1 Dividend Surge to 5-Year High Despite Fewer Payouts | Anil Agarwal Leads the Charge with ₹43,000 Crore Boost

Vedanta Ltd. and its subsidiary Hindustan Zinc Ltd. were responsible for paying a third of India Inc’s total ₹43,000 crore dividend in the first quarter of FY25, according to an analysis of BSE-listed companies. In Q1FY25, 176 companies announced dividends, the fewest since Q1FY20. This data only covers interim dividends declared in the first quarter and not final dividends for the full financial year of 2024.

Kranthi Bathini, an equity strategist at WealthMills Securities Pvt. Ltd, explained that Vedanta’s promoters needed to pay off debt, which led to the high dividend payout. “Some companies issue dividends because their promoters need funds. They frame it as rewarding shareholders, but it’s often about meeting financial needs.”

In the first quarter, Vedanta paid ₹7,821 crore in dividends, while Hindustan Zinc paid ₹8,028 crore. Vedanta had announced in May that it plans to raise ₹8,500 crore through equity or debt.

Promoters, such as Vedanta’s Anil Agarwal, benefit from these dividends. Agarwal earned ₹6,800 crore in dividends in 2023-24. By the end of March 2024, Vedanta’s total debt stood at ₹71,760 crore, while net debt was ₹56,334 crore.

Other promoters also gained significantly from dividends. Tata Sons Pvt. earned more than ₹36,500 crore from dividends and share buybacks. The Shiv Nadar family, which owns HCL Technologies, received ₹8,600 crore in 2023-24.

Dividends in Q1

Vedanta Ltd, Hindustan Zinc, Tata Consultancy Services, and HCLTech were among the top five dividend-paying companies in Q1, contributing to 64% of the total payout.

Public sector undertakings (PSUs) also paid substantial dividends. REC Ltd and Power Finance Corporation Ltd were among the top five dividend payers in the quarter.

Bathini noted, “PSUs and certain corporate groups usually declare the largest dividends, leading to a five-year high in overall dividend outflow.”

This record dividend distribution happened despite companies reporting lower earnings. Revenue growth slowed to single digits for the first time in six quarters, with rising costs, weak global demand, and slow rural markets impacting profits. An analysis of 1,475 BSE-listed companies showed a 9% year-on-year increase in revenue and a modest 5% rise in net profit.

Fewer Companies Paying Dividends

While some companies gave high dividends, many others held back. Only 176 companies paid dividends in Q1FY25, compared to 302 in Q1FY23, 523 in Q1FY22, 532 in Q1FY21, and 601 in Q1FY20. This shows a steady decline in the number of companies distributing dividends.

Sandeep Bagla, CEO of Trust Mutual Fund, explained that many companies prefer to keep surplus cash for future business expansions or capacity increases. “I’m not a fan of companies that hold onto large cash reserves, as this earns little for shareholders.”

Ajit Mishra, Senior VP at Religare Broking Ltd, suggested that companies paying dividends may not be planning to expand soon. “Dividends give investors a reason to hold onto stocks, even if the company isn’t performing well.”

In a market with fewer dividends, investors should aim for a balanced portfolio, according to Bagla. “I’d invest in growth companies, as India is a growth market. But having some dividend-paying companies in a diversified portfolio is also a good idea.”