As the company’s plans for public issue materialised, Interglobe Enterprises that operates India’s largest passenger carrier – Indigo – seems to have significantly raised its dividends payout and raised it by almost three times for the financial year 2015 over that in the previous year.
As the company’s plans for public issue materialised, Interglobe Enterprises that operates India’s largest passenger carrier – Indigo – seems to have significantly raised its dividends payout and raised it by almost three times for the financial year 2015 over that in the previous year. Data on dividend payout accessed from the draft red herring prospectus (DRHP) of Interglobe Enterprises shows that the company has paid dividends amounting to over Rs 3,000 crore in four financial years including the current financial year thus enriching its promoters.
Data available for the last five years shows that barring FY12 when the company did not announce dividends, it has followed a liberal dividend policy and distributed more than 70 per cent of its net profit in each of the years in the form of dividends. In fact, for the current financial year 2015-16, the company has already distributed Rs 1,002.9 crore in dividends, even though only one quarter has gone by and three are still to go.
Disclosures in DRHP show that as the plans of initial public offer of the company came closer to fruition, the company significantly increased its dividend payout per share. While the dividend per share stood at Rs 12,299 for the year ended March 2014, it almost trebled to Rs 35,169 per share in the financial year 2014-15. Even the interim dividend for the year 2015-16 amounts to Rs 32,668 per share.
“Our Company declared dividends for fiscal 2011, 2013, 2014 as stated in the restated financial statements. In addition, the Company has also declared interim dividends for fiscal 2015 and 2016. All the dividends and interim dividends declared by our Company have been paid as of the date of this Draft Red Herring Prospectus,” said the company in its draft prospectus that it filed with the Securities and Exchange Board of India.
While the company seems to have a liberal dividend policy as of now, investment experts feel that the payout ratio for the company is on the higher side.
“Generally the pay-out ratios are high for companies in the FMCG sector but for an airline company the payout looks very aggressive. Also as a promoter of an airline company, you always want money to be there with the company for any eventuality and the sector is exposed to various risks,” said the head of research at a leading financial house. He also added that it remains to be seen if the company maintains similar pay-out ratio after it gets listed at the stock exchange.
But for private limited companies, they can decide what they want to do with the money and also technically there is nothing wrong with such practices. Prithvi Haldea, chairman of Prime Database, while declining to comment on a specific case, said that there is nothing wrong with it as in a private limited company the promoter can decide what to do with the money. “Legally one is allowed to do that. Also they are going in the market with all the disclosures and the valuations will be based on the current balance sheet status,” said Haldea.
In response to queries on high dividend payout, the company said, “We have just filed the DRHP with SEBI and till we are listed on the stock exchanges, we need to adhere to strict publicity guidelines advised by the regulatory authorities. Request you to please refer to the DRHP for the information provided. We have no further comment beyond that.”