Prior to the amendment, the dividend payout policy was around 50% of profits after tax on standalone financials to the extent possible.
Bajaj Auto, the cash-rich two- and three-wheeler maker, on Thursday amended its dividend distribution policy. The company said it would arrive at its dividend payout ratio based on the surplus funds available with the company and that it would pay a percentage of profits after tax on the company’s standalone financials.
Shares of Bajaj Auto rose 2.46% on the BSE on Thursday to Rs 3,663.45 after the announcement.
Prior to the amendment, the dividend payout policy was around 50% of profits after tax on standalone financials to the extent possible. As per the revised policy, dividend distribution would be up to 90% when the surplus cash is over Rs 15,000 crore. If the surplus was between Rs 7,500 crore and Rs 15,000 crore, the dividend payout would be up to 70%, and if the surplus was below Rs 7,500 crore, the dividends would be up to 50%.
Surplus funds for dividend purpose comprises investments in financial assets other than in equity shares of group companies and strategic investments. The final dividend will be recommended by the board for approval of the shareholders in a general meeting, while interim dividend, if any, may be declared by the board.
Bajaj Auto said its dividend distribution policy was primarily aimed at enhancing long-term shareholder value and sustainable growth such that the shareholders can participate in the company’s growth while maintaining the company’s long-held strong financial foundation. Dividend distribution would be be subject to internal and external factors but the board would endeavour that the dividend amount in every financial years will be stable and steady.
Companies are seeking to give shareholders higher payout while distributing dividends and returning cash to shareholders. Hindalco, an Aditya Birla group company, amended its dividend payout plan in February 2021 and said the company would endeavour to distribute a dividend in the range of 8-10% of the free cash flow at Hindalco at the consolidated level subject to internal and external factors and compliances. Earlier, the company paid dividend on standalone net profit.
Technology company Infosys had increased payout from 70% of free cash flow to 85%. Nilanjan Roy, CFO, Infosys, had said at the company’s analyst meet in November 2020, they had revised capital allocation policy to pay out more money to shareholders and give more predictability in their returns.