SP Group may raise ‘low dividend’ issue at Tata Sons AGM

The Tata Group holding company posted a 164% rise in net profit to ₹17,171 crore in the year ended March and announced a dividend cash outflow of ₹404.15 crore, or about 2.4%. Officials close to the SP Group said this is meagre against the industry normal of more than 25% and over 70% at

(). A low payout ratio had been justified in the past by the large write-offs that Tata Sons had to make, they said.

“There should be a clear dividend policy for a large group such as the Tatas. This will give clarity on how much it should pay. The rights of minority shareholders have to be protected too,” said a legal expert close to the SP Group.

The Mistry family-owned SP Group and Tata Sons didn’t comment.

The SP Group’s Cyrus Investments and Sterling Investment Corp. holds an 18.4% stake in Tata Sons, some part of which has been pledged. Insiders said the holding company will be keen to reinvest profits in growth businesses. Cyrus Mistry had been ousted as chairman of Tata Sons in 2016, leading to a legal tussle between Tata Sons and the SP Group. Tata Sons won the legal battle in March 2021.

The holding company’s revenue, mainly dividend income and brand royalty fees, rose 33% to ₹2,573 crore. Other income, largely profit from selling part of its stake in the share repurchase scheme of TCS, rose to ₹11,560 crore from ₹10,138 crore in FY21. It made a gain of ₹11,164 crore from participating in the TCS share buyback scheme and received a dividend income of ₹9,609 crore.

“The payment of dividends is governed by the conditions of the Companies (Declaration and Payment of Dividend) Rules, 2014,” said Ashish K Singh, managing partner of law firm Capstone Legal. “In my opinion, from a legal standpoint, the average rate of dividends paid by other companies in the same industry is of no relevance when dividends are being declared.

Under the Companies Act, the company is not obligated to declare a minimum amount as a dividend to shareholders, said Sudip Mahapatra, partner at S&R Associate. “It is the prerogative of Tata Sons to decide the quantum of the dividend payable to its shareholders,” he said.

N Chandrasekaran, who was reappointed as Tata Sons chairman for a second five-year term in February 2022, has restructured several group businesses and taken bets on new growth engines. Tata Sons infused over ₹80,000 crore and made additional secondary market purchases of around ₹10,000 crore in group companies in the past five years to strengthen their balance sheets.

The holding company of the $125 billion conglomerate also invested a further ₹20,000 crore in new businesses such as app Tata Neu as well as the recent acquisition of Air India, besides sectors like semiconductors, batteries and 5G. It has also already infused as much as ₹15,000 crore since January 2022 into the revival of Air India.

Shareholders will vote at the AGM to approve the reappointment of Ajay Piramal, chairman of

, as an independent director for the third time on the board of Tata Sons. They will also vote on the reappointment of Venu Srinivasan, Tata Trust nominee on the board, who has been abstaining from receiving any commission since he joined. Other independent directors such as Ralf Speth, Harish Manwani, Ajay Piramal and Bhaskar Bhat received ₹5.2 crore as sitting fees for the year. Vijay Singh was paid ₹44 lakh for the year.

Both Srinivasan and Piramal had been appointed as non-executive directors in April 2016.