ITC dividend gift
Buoyed by a Rs 1,020-crore tax gain, city-based conglomerate ITC Ltd has declared a hefty dividend of Rs 10.15 a share even as the company’s gross revenue from sales in the fourth quarter dropped because of the outbreak of the pandemic.
Cash outgo on account of the dividend payout would be 80 per cent of ITC’s profit after tax of Rs 15,136 crore for 2019-20. This is in line with the new dividend distribution policy adopted by the company on March 18, a week before the nationwide lockdown, after the Union budget shifted the onus of paying income tax on dividend to the shareholder from the corporate houses.
The company distributed Rs 5.75 a share (of face value Re 1) dividend for 2018-19. ITC’s new dividend payout ratio is now fixed at 80-85 per cent of the profit after tax. Apart from 1.2 million retail shareholders, the high payout would be welcomed in a pandemic year by four state-run insurance companies that together hold a 20.63 per cent stake and foreign tobacco major British American Tobacco (BAT) Plc, which has a 29.48 per cent share.
Gross revenue from sales in the January-March quarter dropped 6.3 per cent to Rs 11,300 crore from Rs 12,064.1 crore a year ago. However, the profit after tax went up 9.1 per cent year-on-year to Rs 3,797 crore from Rs 3,481.9 crore as it migrated to the lower corporate tax regime from the second quarter. ITC booked a Rs 340-crore tax credit in the fourth quarter and Rs 1,020 crore for the whole year.
The post-tax profit for 2019-20 went up 21.4 per cent to Rs 15,136 crore from Rs 12,464 crore, while gross revenue from operations was up 2.4 per cent to Rs 46,323 crore from Rs 45,221 crore.
In the fourth quarter, sales from cigarettes declined 6.5 per cent to Rs 5,130.5 crore from Rs 5,485.9 crore. Edelweiss Research said cigarette volumes declined 10 per cent compared with their expectation of an 8 per cent dip.
The performance of the non-tobacco FMCG segment declined 2.8 per cent, while hotels were down 8.6 per cent in the fourth quarter over the year-ago period.
ITC said the contagion had a significant impact on the hotels and education and stationery products businesses as it coincided with the peak period and the onset of the school season, respectively.