InvestorQ : Can you tell me about the third interim dividend declared by Vedanta?
Mary Joseph made post

Can you tell me about the third interim dividend declared by Vedanta?

Arusha Ray answered.
12 months ago

In February 2022, Vedanta declared its third interim dividend for financial year FY22. This coincided with the stock of Vedanta touching a high of Rs.400 per share. The third interim dividend of Rs.13 per share adds up to 1300% on face value of Rs.1. The total dividend pay-out entailed in the third round is Rs.4,832 crore. Vedanta has fixed the record date for deciding eligible shareholders for dividend payment as 10th March 2022.

Let us quickly look back at the first 2 dividends in this fiscal year. Vedanta had declared an interim dividend of Rs.18.50 per share in Sep-21 and then again it declared its second interim dividend of Rs.13.50 per share in Dec-21. Adding up the first, second and third interim dividends, Vedanta has now already paid out Rs.45 per share as dividend, with possibly one more to go. The dividend yield as of date is already a healthy 11.62%.

There is a rather pertinent question that does arise. In rupee terms, Vedanta has paid out dividends of Rs.6,877 crore in Sep-21, Rs.5,018 crore in Dec-21 and Rs.4,832 crore in Feb-22. That aggregates to a total dividend pay-out in fiscal year FY22 at Rs.16,727 crore. The million dollar question is why were these funds not used for reducing the Rs.57,000 crore of outstanding debt. It could have been used partially, if not fully.

In the last few quarters, the stock of Vedanta has been amidst a massive rally as global commodity prices have risen to new highs. Due to this metals rally, Vedanta was raking in the moolah and did not even see the need to go ahead with its massive rejig and restructuring plan. It had planned to separate the steel and oil business into separate entities and list them but that idea has also been given up amidst this commodity rally.

The generous dividends paid out by Vedanta this year has its origins in a capital allocation policy laid out by the company. It has demarcated how the surplus profits will be allocated across capex, dividend pay-outs and funding inorganic growth. Under this revised policy, at least 30% of attributable sustainable PAT of the company (excluding Hindustan Zinc profits) will be distributed in the form of dividends to shareholders. Agarwal holds 50% in Vedanta.