Wednesday, July 18, 2007

The More You Have, The More You Get...

Even though I don't invest in stocks (not being part of the elite clan of 3-5% Indian population who do), I was/am still awed by the news items about the dividends declared by various companies... And the implied "wealth" they must have created for the "middle-class" investors...

Given this personal context (ignorence?!), I found this report about the dividends paid by Indian companies in the Outlook Business (July 20th '07) quite interesting:

  • Between 01-02 and 06-07, the %age of profits that Indian companies paid as dividends dropped down from 12.85% to 10.71%

  • "In the list of 309 companies (of the BSE 500) only 27 paid out more than 30% of profits as dividends. Of these, 11 were the MNCs that have traditionally reptriated high dividends."

  • However, a look at the top dividend payers (in terms of %age of profits distributed) reveals an interesting finding - 15 of the top 20 dividend-payer companies had promoter holding of over 40%...
Here is the data for 2006-07:

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One must also note that in India, income from dividends is non-taxable....
And who were the "Hand-Sum Takers" of promoters' dividend during last 5-years?:

Asim Premji (Wipro)
Rs 2,154.38 crores

Shiv Nadar (HCL Group)
Rs 1,569.03 crores

BK Munjal (Hero Group)
Rs 503.25 crores

Rahul Bajaj (Bajaj Group)
Rs 431.79 crores

Anil Aggarwal (Sterlite)
Rs 568.11 crores

Dilip Sanghvi (Sun Pharma)
Rs 253.25 crores

...which reminds me of an old Hindi saying "पैसा पैसे को खीचता है" (money attracts more money) - or in modern paralance, we live in a (self-created) system where "The More You Have, The More You Get"...

Perhaps, that is why, the "trickle-down effect" does not happen...


Nagesh said...

Great post--thanks for compiling the figures here. It is quite astonishing to see how much wealth is accumulating at the very top of Indian society these days. I was shocked to learn recently that Mukesh Ambani is #14 on the Fortune 500 list!!

Glad I found your blog--I'll be linking to it on mine at Hope you'll do the same. :)

Supratim said...

The interesting thing about the list (Premji, Nadar, Munjal, Bajaj, Aggarwal, Sanghvi) is that they are all self-made billionaires, with the possible exception of Bajaj, but even Bajaj has built significantly on what he received. And, some of them are paying back to society, out of their own wealth.

But never mind, we shall still grudge them their wealth. Green is such a lovely colour.

Madhukar said...

as usual, so very off the mark!:)

Supratim said...

Well, thats entirely possible ...... as I am never sure, with you, what exactly is your point ..... you have so many ... : )

Is it that these people are extremely rich while the rest of India is not?

That corporate India does not pay enough dividends? Or that they should pay more?

That cos with a high promoter ownership pay out a higher % of the profit?

That there is no income tax on dividends (although there is a dividend distribution tax)?

Ah well, when you have sorted out the issues, maybe I can get closer to the mark.