Tata Consultancy Services will distribute a Rs 5,550-crore dividend, of which more than 70% will go to Tata Sons, its largest shareholder. The dividend income from TCS will add to the kitty of the parent Tata Sons, which is building new digital businesses in the wake of coronavirus and is preparing to submit a financial bid for divestment-bound Air India.
TCS, while announcing its fourth quarterly numbers on Monday, proposed a final dividend of Rs 15 per share. However, this will be paid after getting approval from its shareholders’ at the Annual General Meeting to be held on June 10. Tata Sons, being the owner of 72% of TCS will receive Rs 4000 crore as dividend from the IT services company’s total pay-out of Rs 5,550 crores. The parent company will be receiving dividend on the pledged stock as well which amounts to 0.47% of the TCS stake, said a legal expert.
TCS is the first blue-chip to declare a dividend pay-out through its Q4 earnings. It is to be seen whether other companies would also reward high dividends to the shareholders or scramble to hoard cash amidst the rising Covid infections and increasing chances of harsher lockdowns in some parts of the country.
FMCG giants and IT companies are anticipated to give dividends since their business has not been hit. But fuel, travel & hospitality and other players will be giving a very small dividend, or none at all. A company’s decision to pay a dividend generally depends on its comfort with having adequate cash flow for other purposes, after the pay-out. TCS had a free cash flow of Rs 37,968 crore as on March 31.
In the fiscal year 2021, TCS returned over Rs 30,664 crore to shareholders through buybacks and dividends. Parent Tata Sons, which benefitted the most from the IT services subsidiary’s cash pay-out, will see this imitated in its fiscal 2021 revenue numbers. In fiscal year 2020, TCS had reported for 90% of Tata Sons revenue.