Don’t expect your dividend cheques to come soon

Fearing Bad Times, Cos Could Trim Or Do Away With Payouts

IT'S time to adopt conservative dividend policies as fears of a slowdown loom large over the Indian economy and the corporate sector. The rush to dole out interim dividends, as evident till the last fiscal, seems to have eased in the current year, thanks to growing concerns that corporate earnings would be under pressure amid signs of slackening demand and rising interest cost.
    Reflecting a declining propensity to pay interim dividend is the sharp fall in the number of board meetings being held for this specific agenda. In January-March '08, as many as 104 companies held board meetings to discuss interim dividends, followed by 34 in the April-June quarter and only 28 in the July-September quarter. Most analysts predict a gloomy picture for earnings in the current year, which, they feel, will prompt companies to take severe costcutting measures, including downsizing, and paying lower dividends to shareholders.
    "This year, corporate performances are unlikely to be as robust as in the past few years. In such a scenario, most companies may cut down interim dividends to preserve cash for the future," said Anagram Stock Broking head of research VK Sharma. He, however, said the rush to pay interim dividend is mostly seen in the third and fourth quarters, and so one cannot draw a conclusion on India Inc's dividend policy simply on the basis of trends in the first two quarters.
Analysts apparently are not so bullish on earnings prospects going by their previews for July-September quarter. Citigroup, in its report 'India Equity Strategy' has predicted a slower growth for the quarter. Earnings for the Sensex companies would be lower than the 14-15% recorded in the first quarter. "Topline growth will continue to be robust at 25%, which suggests relatively strong demand, but a possibly inflationary environment too," said the foreign broking house in the report.
While not many companies have announced results for the July-September quarter, the trend so far has not been encouraging. An analysis done by Cline, a database tracking quarterly results, showed that 80 companies have reported a 10% rise in net profit to Rs 3,363 crore while the aggregate sales grew 31% to Rs 23,894 crore during the period.
    vijay.gurav@timesgroup.com