Doshi, a revered asset manager in the industry, called the dividend payout by the company for the previous financial year a ‘rude shock’ and a ‘joke’, as he pointed out that promoter Kalanithi Maran did not take any cut in the commission paid to him by the company for his services.
“The message this is sending out is very, very controversial… this is a serious issue of corporate governance now,” Doshi said in a post-earnings conference call of the management late Friday.
The company’s board only paid an interim dividend of Rs 5 per share, announced post March quarter earnings for the financial year ended March, 2021. Based on the dividend announced, the company’s dividend payout ratio in 2020-21 plummeted to 13 per cent from 57 per cent in the financial year ended March, 2020.
In absolute terms, the interim dividend paid by the company in 2020-21 tanked 80 per cent to Rs 197 crore from Rs 985 crore paid out in 2019-20, the company’s consolidated cash flow statement showed.
The decline in dividend payout came despite a 15 per cent rise in cash and cash equivalents as well as 10 per cent rise in earnings per share in the previous financial year.
The Sun TV management, which attended the conference call, explained the cut in the dividend payout as part of prudent risk management given the ongoing Covid pandemic. “We are living through some very tough times and there is also rumour of a possible third wave later this year,” the company said in response to Doshi’s question.
The management highlighted that it would also incur major expenses to the tune of Rs, 1,200 crore on eight films, including two mega films, that are currently under production.
However, Doshi said he was confused by the sudden change in the company’s signalling to shareholders after the company’s management in the December quarter earnings call said that it would like to pay out cash on books, as it dampens on return ratios.
Doshi was particularly miffed by the fact that the company chose to cut shareholder dividends, citing extraordinary conditions created by the pandemic yet continued to pay the same commission to the promoter as was paid in 2019-20. Sun TV said the promoter fee has been capped at the same level since 2017.
The Sun TV management tried to assuage Doshi that they will apprise the board of the concerns raised around the dividend payout. “We are fully aware of the misgivings you have. Trust us we will take back the message. Our intent is not to deny minority shareholders,” the company’s management said.
Doshi recommended that the company issues an explainer on the cut in dividend payout ratio to shareholders or a statement with the June quarter earnings of the company.
