Anil Agarwal led Vedanta Ltd’s shares closed 2.84% higher at ₹ 282.05 apiece on the National Stock Exchange (NSE) on Thursday after the company’s board declared a dividend. 

The company in an exchange filing mentioned that its board has approved the fifth interim dividend of ₹ 20.50 per share, i.e., 2050% on the face value of ₹ 1 per share, amounting to ₹ 7,621 crores. The record date for the same is fixed at April 7, 2023 

Vedanta Ltd is known for paying handsome dividends to its shareholders. Last year it topped the charts for the highest dividend yield in India. In FY23, it announced five interim dividends amounting to ₹ 101.5 per share. Together, these dividends cost the company about ₹ 37,700 crores in FY23 alone. In contrast, its net profit stood at ₹ 23,710 crores in FY22 and cash equivalents at ₹ 23,474 crores at the end of the December quarter of 2022. 

As a shareholder, the hefty dividend payout may be great news. However, Vedanta Resources (Vedanta Ltd holding company) owns a 69.7% stake in the company and it benefits greatly because it gets a lion’s share of the total dividends. 

Vedanta Resources has about $ 7.7 billion of net debt burden and was downgraded by Moody’s on the back of increasing refinancing risks. CRISIL on the other hand, has lowered Vedanta Ltd rating, citing that all cash flow from the company is going to Vedanta Resources towards large maturing debt obligations. 

Moreover, Vedanta Ltd holds a 64.92% stake in Hindustan Zinc, which is also known to pay hefty dividends. Vedanta Ltd, which had a net debt of ₹ 38,076 crores, is believed to be partly servicing it with the help of Hindustan Zinc’s dividend. 

In another development, the company’s Chief Financial Officer (CFO) Mr Ajay Goel resigned to pursue a career outside of the group. The Company will announce the details of the successor in due course and the same shall accordingly be intimated to the stock exchanges. 

The Mumbai-based company Vedanta Ltd has a market capitalization of ₹ 1,01,719 crores and is a large-cap company. It has a high return on equity of 29.46% and one of the highest dividend yields of 29.54% in the Indian markets. However, it has a slightly high debt-to-equity ratio of 1.09. The company’s shares were trading at a price-to-earnings ratio of 7.07, which is significantly lower than the industry P/E, indicating that the stock might be undervalued as compared to its peers. 

Written by Simran Bafna 

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