http://www.livemint.com/Companies/NJqac6WSfzEj4rUqAycoaP/Why-did-Vedanta-double-its-dividend-payout.html
Mumbai: Vedanta Ltd’s decision to nearly double its interim dividend in a quarter which witnessed a 40% fall in net profit has raised questions from analysts.
While all shareholders gain from the higher dividend, some analysts wonder whether the generosity is linked to parent firm Vedanta Resources Plc.’s strained cash flows. A higher payout benefits all investors, including the promoters—in this case Vedanta Resources.
“There are no cash flows for the London-listed parent company apart from the copper mines in Zambia and Vedanta Ltd. ICDs (inter-corporate deposits, a form of unsecured loan within group companies) are also difficult to source as a company requires permission of minority shareholders. Since the cash flows from the mines in Zambia are not so healthy now, dividend is the only way out to service the parent’s debt,” said a metal analyst at a domestic brokerage house, who declined to be identified due to company policy.
“Payment of dividend is the prerogative of the management and one cannot question it on the grounds of law or governance. But one can always question it on the grounds of prudence,” said J.N. Gupta of Stakeholder Empowerment Services.
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