State-run Indian Oil Corp (IOC) this week announced that it would give a second interim dividend of Rs 1,412 crore for the current financial year. The development comes even as the government scrambles to mop up enough funds to meet its Rs 80,000 crore divestment target for the current financial year. It is also expected that oil explorer ONGC will follow suit and declare a second interim dividend too.
In a stock exchange filing on tuesday, IOC said that its board at a meeting on Tuesday approved the payment of Rs 1.50 per share of 15 per cent in a second interim dividend for 2018-19 to its shareholders. “The dividend will be credited to the account of the shareholders or the dividend warrant in respect thereof will be dispatched on or before April 10, 2019,” the filing said.
IOC is owned by the government with a 53.88 per cent stake, which means it stands to gain around Rs 761 crore, excluding dividend distribution tax in this interim dividend. The government also expects some more funds from ONGC, which is expected to consider a second interim dividend at a board meeting to be held on March 23. These are only the latest public sector firms to have announced interim dividends in order to help the government meet its revenue shortfalls and divestment targets.
According to reports, government revenues may fall short by around Rs 80,000 crore of its fiscal deficit target. For instance, state-run coal major Coal India Ltd on March 14 declared a second interim dividend of Rs 5.85 per share. The government holds 72.91 per cent stake in Coal India and stands to get Rs 2,647 crore, excluding dividend tax.
While ONGC had reportedly resisted declaring another interim dividend for the year stating that it does not have surplus cash to make such payments within a month of an interim dividend payout, sources now say it will likely do so after its board meeting. According to regulations, a company cannot declare a second dividend within a month of the previous payout and companies like ONGC would need to seek approval of markets regulator Sebi to make such a payment.
IOC in December declared Rs 6.75 per share interim dividend alongside a Rs 4,435-crore share buyback to help the government meet its revenue targets. ONGC had announced an interim dividend of Rs 5.25 per equity share on February 14 while also approving a Rs 4,022-crore share buyback. According to reports, the government’s tax shortfall is likely to be around Rs 30,000-40,000 crore in terms of GST targets and a similar one in direct tax collections. This might make it difficult for the government to meet its revised fiscal deficit target of 3.4 per cent.
In quest for funds
Reports say the government’s tax shortfall is likely to be around Rs 30,000-40,000 crore in terms of GST targets and a similar one in direct tax collections.
The second interim dividends announced by major public sector firms is likely to help the government meet its fiscal deficit target and divestment targets for the current fiscal
Of the Rs 1,412 crore second interim dividend declared by Indian Oil now, the government will get around Rs 761 crore. ONGC is likely to consider a similar move at its board meeting on March 23
Government-owned Coal India Ltd had earlier this month also declared a second interim dividend of Rs 5.85 per share, with the government set to gain around Rs 2,647 crore