The IT industry has emerged the most resilient amid the pandemic and the top players, including TCS and Wipro, have been rather generous in sharing their bounty with shareholders, in the form of dividend and buybacks. Tata Sons, which holds a 72 per cent stake in TCS, has been raking it in not just this fiscal, but over the past five years.
TCS has paid ₹77,128 crore to Tata Sons between FY16 and FY20 through dividends and buybacks. An additional ₹14,600 crore is likely to flow to the parent company through the payouts and buybacks announced so far this fiscal, taking the tally since 2016 to beyond ₹91,000 crore.
Between FY16 and FY20, the IT bellwether paid ₹77,697 crore in dividend (including a special dividend) to its shareholders. Of this, Tata Sons received ₹56,395 crore.
Sharp rise in dividend
TCS’ shareholder payout ratio (including special dividend and buyback) has increased sharply in recent years, from 42 per cent in FY16 and FY17 to 106 per cent in FY18 and 98.6 per cent in FY20.
In Q1 and Q2 of the current fiscal, it declared interim dividends of ₹5 and ₹12 per share, respectively. These are likely to result in a ₹6,379-crore payout to shareholders, of which Tata Sons will receive ₹4,594 crore, based on its holding.
In addition to the huge dividend payouts, TCS has been rewarding shareholders with a series of mega share buybacks over the past three-four years.
In 2017, it successfully carried out a ₹16,000-crore share buyback, then touted as India’s largest ever. Within two years, it put through another buyback for ₹16,000 crore. The two buybacks helped Tata Sons raise close to ₹20,733 crore.
Earlier this month, the company announced its third mega share buyback plan of ₹16,000 crore covering 5.33 crore equity shares at ₹3,000 apiece. It is likely to fetch Tata Sons ₹10,000-12,000 crore.
TCS has a huge pile of cash balance. In the absence of any profitable investment opportunity, share buybacks present a tax-efficient way to plough money back into the parent company.
TCS’ operating cash flow grew 11 per cent to ₹26,603 crore in FY20, from ₹23,998 crore in FY19.
In comparison, the debt-laden Tata Steel’s operating cash flow fell 11.45 per cent to ₹13,454 crore (₹15,193 crore) during the period. For Tata Motors, the operating cash flow fell to negative territory of ₹1,455 crore in FY20 from ₹6,293 crore in FY19.