Bajaj Auto has amended its dividend distribution policy to reward shareholders and boost return ratios. The policy will consider the surplus the company has when calculating the dividend payout as a percentage of profits after tax, the Pune-based firm said in a stock exchange filing on Thursday.
"Subject to the caveats given in the Policy, the Board shall endeavor to arrive at a dividend pay-out as a percentage of profits after tax on the company's standalone financials, taking into account the surplus funds available with the company," it said.
“With these changes the shareholders are likely to get higher dividends. This would reduce the company's cash balance and would boost the return ratios,” said Mitul Shah, head of research at Reliance Securities.
Bajaj Auto, at the end of fiscal 2020, had cash and cash equivalent of Rs13,972 crore. It was Rs16,741 crore in FY19 and Rs11,938 crore in FY18, according to Capitaline. It paid Rs 3,472 crore as dividend in fiscal 2020.
The surplus fund for this purpose comprises investments in financial assets other than in equity shares of group companies and strategic investments, the company said in the filing.
For instance, if Bajaj has a surplus fund of over Rs15,000 crore (before dividend distribution), the dividend payout will be up to 90 per cent, if it has a surplus of over Rs7500 crore to Rs15,000 crore, the payout will be up to 70 per cent. On a surplus less than Rs7500 crore, the payout will be up to 50 per cent.
Bajaj Auto’s shares have been outperforming the broader Sensex. Year-to-date it has gained 76.6 per cent (Rs3,575.5) against BSE Sensex that is up 69 per cent. It has, however, underperformed the auto index that has gained 113.5 per cent in the same period.
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