Promoters pocket half of India Inc's massive dividend payouts despite sluggish earnings

According to a Mint analysis of 496 companies from the BSE 500, based on Capitaline data (which includes both audited and unaudited figures, along with proposed dividends), promoters across public, private, and multinational corporations collectively received ₹2.5 trillion, or 51.5% of the total dividends declared. 

Of this, private-sector promoters took home ₹1.34 trillion (with a 53% share), a sharp 36% rise from the previous year. Foreign parents of MNCs mopped 20% more. The government, as a promoter of public sector undertakings (PSUs), meanwhile, saw its dividend haul from PSUs dip 4%.

The trend of promoters claiming a lion’s share is not surprising, though. In FY24, they took home ₹2.1 trillion (48.7% of total dividends), while in FY23, their share was even higher at ₹2.2 trillion (53.6%). The latest figures, however, underscore a growing concentration of dividend income in the hands of promoters, raising questions about capital allocation priorities. Dividends outpaced net profit growth of 9.5% in FY25.

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Higher stakes, bigger take

A deeper dive into 370 consistent dividend-paying companies from the BSE 500 in FY24 and FY25 reveals that promoters are reaping more by distributing more. Promoters holding more than 70% stake in companies saw their dividend receipts surge by 45% compared to the previous year. 

In contrast, those with holdings between 50% and 70% registered a modest 8.5% increase, while firms with promoter stakes below 50% saw an 8.9% rise. A rise in promoter stakes in some cases also helped.

Sourav Choudhary, managing director of Raghunath Capital, which manages the value-focused Vision Fund, noted, “The sharp rise in dividend payouts to high-stake promoters, particularly those holding over 70%, indicates their growing influence in capital allocation decisions. While robust payouts reflect financial stability, such skewed distributions raise governance concerns and questions about board independence."

“If capital is being diverted toward promoter cash flows rather than productive reinvestment, it could undermine long-term shareholder value. This trend warrants closer scrutiny from institutional investors and regulators," he added.

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Growth caution

While record dividend payouts might initially appear as a sign of corporate health, analysts caution that they could instead reflect a lack of viable reinvestment opportunities. Anand K. Rathi, co-founder of MIRA Money, argued that the surge in dividends is less about benefiting promoters and more about companies sitting on surplus cash with limited growth avenues.

“From a tax perspective, dividends are no longer the most efficient way for promoters to extract value," Rathi said. “The real driver is the absence of better reinvestment opportunities. Companies in sectors like technology, telecom, commodities, and PSUs—which dominate the dividend payout list—are flush with cash but face constrained growth prospects."

“This is essentially a signal of a slow-growth environment, which is also reflected in muted earnings. If more lucrative investment opportunities emerge, dividend payouts will likely taper off," he added.

However, not all experts view high dividends as a concern. Kranthi Bathini, equity strategist at WealthMills Securities, said, “Dividends are always rewarding for investors, regardless of the motives behind them. The payout levels and dividend yields can vary significantly from company to company, depending on their future growth plans, capex needs, and expansion strategies. If a company sees strong growth opportunities, it may allocate more capital toward investments and reduce dividends."

Promoters across several high-profile firms amassed huge wealth from their liberal payouts in FY25. Tata Consultancy Services (TCS) topped the chart with a 72.6% year-on-year jump in promoter dividends to ₹32,735.7 crore. This was followed by Vedanta with a 40.2% rise in payouts to ₹9,123.4 crore.

This is the second part of a four-part series of data stories on the dividends declared by India Inc. Read the first part here.