Tata Sons, the unlisted holding company of the $116 billion Tata Group is looking at an over 40% decline in its dividend income for the financial year 2015-16.
Tata Sons has 29 public listed companies that together account for 8% of the total market capitalisation of the over 4,000 companies listed on the Bombay Stock Exchange. The dividend payed out by these 29 Tata companies is the only source of revenue for Tata Sons.
In FY15, Tata Sons saw its revenue rise to Rs 12,183 crores, a jump of nearly 150% over the previous financial year. This increase was led mostly by higher dividend income from Tata Consultancy Services (TCS).
In FY15, TCS paid out a dividend of Rs 79 per share, including a special dividend of Rs 40 per share on occasion of completing 10 years since listing. That's more than double the Rs 32 per share dividend it paid in FY14. TCS' FY15 dividend payout earned Tata Sons over Rs 11,000 crores, amounting to over 93% of its total revenue that fiscal.
In FY16 dividend income from TCS declined. TCS announced a dividend of Rs 43.50 per share. That translates into a dividend income of Rs 6,279 crores for Tata Sons. Though this dividend payout is an increase over FY14, it is lower than the enhanced dividend paid out in FY15.
This decline in dividend income will lead to a dip in revenue for the promoter company. Tata Sons' total dividend income in FY16 is estimated to be in the range of Rs 6,950-7,050 crores.
It's not just lower income from TCS. BloombergQuint analysed the dividend payout by 11 Tata companies, which income amounted to 98.2% of the total revenues of Tata Sons in FY15.
Of these 11 companies, 5 have reduced their dividend payouts in FY16. Besides TCS, they are Tata Chemicals, Tata Communications, Titan and Trent. Indian Hotels that didn't pay a dividend in FY15, paid 30 paisa per share to its shareholders as dividend last fiscal. Titan paid a slightly lower dividend this year of Rs 2.20 per share against Rs 2.30/share. But since Tata Sons increased its stake in the company, the dividend income received by the parent from Titan increased by 31%.
Tata Sons uses its balance-sheet to further philanthropic activities of the Tata Trusts that collectively hold 66% in Tata Sons. The company is also involved in incubating new businesses, in addition to supporting growth and capital expenditure in it's operating companies.
Tata Sons has been paying a dividend of Rs 8,000 per share for the last 5 years, to all its shareholders including Chairman Cyrus Mistry, the single largest shareholder of Tata Sons. Despite the over 40% drop in revenue in FY16 Tata Sons is most likely to maintain this dividend payout to its shareholders.
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