Vedanta declares 3rd dividend for the fiscal year FY22

One of the world’s largest commodity groups and a leading diversified metals and mining conglomerate in India, Vedanta Ltd, has just declared its third interim dividend for the financial year FY22. The spike in dividend per share resulted in the price touching a 52-week high of Rs.400 per share. These generous dividends come amidst record profits made by the Vedanta group as commodity prices have scaled record levels in the last couple of years.

On the 02nd of March, the board of directors of Vedanta Ltd passed a resolution approving the payment of the third interim dividend of Rs.13 per share or 1300% on the face value of Rs.1 per share. The total dividend pay-out in this third phase amounted to Rs.4,832 crore and the Agarwal family will get half of these dividends. The record date for the purpose of deciding eligible shareholders for payment of dividend has been fixed as 10th March.

It may be recollected that Vedanta has already declared two hefty dividends on the stock already in the current fiscal year. For instance, Vedanta had declared an interim dividend of Rs.18.50 per share in Sep-21 and then again it declared Rs.13.50 interim dividend in Dec-21. Including the third interim dividend, the company has already paid out Rs.45 per share as dividends till date and at the current market, the dividend yield is already a healthy 11.62%.

In terms of rupee amounts of dividends paid out, the company paid Rs.6,877 crore in Sep-21, Rs.5,018 crore in Dec-21 and Rs.4,832 crore in Feb-22. That is a total dividend pay-out so far in the fiscal year FY22 to Rs.16,727 crore. The only question that remains unanswered at this point of time is that when the company has outstanding debt of over Rs.57,000 crore, why are surplus cash flows not being used to reduce debt and make Vedanta net zero debt.

A few weeks earlier, it may be recollected, that Anil Agarwal of Vedanta had scrapped the massive rejig and restructuring plan. As per the demerger plan, it had laid out plans to separate the steel and oil business into separate entities and also list them separately on the bourses. It had also plans to merge the UK based parent, Vedanta Resources, with Vedanta Ltd based in India. Apparently, all these plans are now put on hold, or have been scrapped.

One reason for the very aggressive and generous dividends being paid out is the very clear capital allocation policy laid out by the company. It has clearly identified how much of the profits of the company will be allocated across capital expenditure, dividend policy and inorganic growth. As per this policy, minimum 30% of attributable sustainable profit after tax of the company (excluding profits of HZL) will be distributed as dividends to shareholders.