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India's Most Cash Rich Promoters
1) Promoter's Dividend Earnings
2) Total Group Market Cap
3) Group Revenue & Profits
'Turnover is vanity
Profit is sanity
But cash is reality'
CONVENTIONAL wisdom has it that higher the net sales of a company or group, the bigger is its market cap, and the richer will be the promoter. Number-crunching and analysis by the Economic Times Intelligence Group (ETIG), the research arm of ET, turns conventional business wisdom on its head: there's a king-sized gap between vanity and reality.
A clutch of relatively small MNCs and medium-sized 'desi' companies are much more generous in rewarding their owners and shareholders with cash (dividends) than some of the largest business groups in the country.
Take Hindustan Unilever (HUL), for example. HUL's share price may not have performed spectacularly in the past few years, but its parent Unilever has walked away with a dividend cheque of Rs 681 crore. Similarly, cement-maker Holcim, an MNC that recently entered the country, has rewarded itself with dividends of Rs 270 crore for its controlling stake in ACC and Ambuja Cement.
This is much higher than what India's biggest business groups like Birla, Mahindra, Jindal, Murugappa, Godrej and Kirloskar have earned from their listed group companies. Even Azim Premji makes more than some of his illustrious Indian counterparts, the bigger business groups. Last year, he earned a whopping Rs 700 crore through dividend from Wipro.
Among large business houses, only the Tatas and the Mukesh Ambani Group have been able to maintain their reputation by declaring big dividends to ensure that reality matches vanity. Right at the top are the Tatas who earned a total of Rs 1,882 crore as dividends from their 26 listed entities during FY07. More than half of this was contributed by Tata Consultancy Services, which earned them over Rs 1,000 crore last year. In the case of the Mukesh Ambani group, Reliance Industries accounted for over 90% of Mukesh Ambani's dividend earnings of Rs 854 crore in FY07.
Other big cash-earners are Anil Agarwal of Sterlite Group (Rs 333 crore), Munjals of Hero Group (Rs 199 crore), Kumar Mangalam Birla family of the Aditya Birla Group (Rs 164 crore), Jindals of Om Prakash Jindal group (Rs 152 crore) and the Bajajs (Rs 139 crore). The best part, of course, for promoters is that while their salaries and perks are taxable, the dividend windfalls are tax-free.
A look at the table reveals that you don't need to own a diversified conglomerate to rake in big bucks. MNCs are a good example of this trend. Though much smaller compared to Indian business houses in terms of net sales and market cap, their (foreign) parents walk away with maximum dividends. Out of the top 100 cash-earners, 24 are foreign business groups and they account for a fifth of the promoter's dividend earning. What makes the number even more astounding is the fact that these MNC groups account for a little over 10% the top 100 combined net sales and net profit during FY07 in India Inc. On an average, 20% of the net profit earned by MNCs in India is creamed off as dividends by their foreign parents. This is more than twice the rate in case of their Indian peers.
One might also imagine that flamboyant owners who live it up might well be top of the charts when it comes to getting cash from their businesses. But that is simply not the case. The posterboy of flamboyance in India Inc Vijay Mallya earned a paltry Rs 1.5 crore as dividend from his group companies. The same is true for Gautam Singhania, with the ETIG analysis showing that all the Singhanias got from their listed entitites was a mere Rs 11.2 crore. Other measly earners include the Lalbhai family of Arvind Mills (Rs 3.3 crore), Mammen Pillai of MRF (Rs 2.2 crore). The dividend earnings of some of the other business families, including Goenka's RPG Group, Wadias, Dhoots of Videocon, Thapars, other Birlas, Piramals and Gaurs of Jaypee Group, among others is a far cry from the position they occupy on the vanity charts.
In all, India Inc distributed Rs 24,670 crore as dividend last year, or roughly 8% of its net profit. The number, however, is much higher in case of cash-rich companies and Indian subsidiaries of MNCs. Close to three-fourth of all dividend payout is accounted for by the top 100 earners. On an average, promoters cornered 42% of the India Inc's dividends, but promoters in the top 100 gave themselves a higher payout of 48%. Interestingly, the promoter's share of the dividend is rising faster than that of non-promoters. In FY07, the dividend earnings of promoters grew by around 20% over the previous year, more than twice the rate of earning growth of non-promoters.
The best part, of course, for all promoters is that while their salaries and perks are taxable, the dividend windfall is tax-free. They are free to dispose it off the way they choose -- buying Maybachs, luxury yachts and private jets -- without coming under the scrutiny of the tax mandarins.
1) Promoter's Dividend Earnings
2) Total Group Market Cap
3) Group Revenue & Profits
krishna.kant@timesgroup.com
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