Tata Motors, India’s third-largest carmaker by volume, has announced a dividend payout for its shareholders after a gap of seven years. The company’s improved earnings in fiscal 2023, driven by rising vehicle demand, have enabled it to return to the list of dividend-paying companies.
Tata Sons, the majority shareholder with a stake of 44%, stands to benefit the most from the dividend payout. The holding company of the Tata Group conglomerate controls Tata Trusts, which is expected to gain from the dividend distribution.
In fiscal 2023, Tata Motors reported a net profit of Rs 2,690 crore, a significant improvement from the previous year’s loss of Rs 11,309 crore. The company’s stock rose 0.8% on Friday to close at its 52-week high of Rs 520, buoyed by the positive results and dividend announcement.
The dividend payout marks a turnaround for Tata Motors, which had skipped dividends in the previous seven years due to losses. The company had been focusing on restructuring and reducing debt to strengthen its financial position.
Tata Motors has been on an upward trajectory since the second half of fiscal 2022, driven by a strong demand for its vehicles and a gradual recovery in the Indian economy. The company’s sales grew by 28% in fiscal 2023 to 705,401 units, with the commercial vehicle segment leading the way.
The auto major has also been expanding its product portfolio and investing in research and development to meet changing customer needs and emerging market trends. In recent months, it has launched new electric and hybrid vehicles as part of its sustainability drive.
Tata Motors’ dividend announcement is likely to strengthen investor confidence in the company and boost its market capitalization. The dividend payout is expected to be around Rs 50 per share, which will translate to a yield of approximately 1% based on the current stock price.
Analysts have welcomed the move by Tata Motors, citing it as a positive development for the company and its shareholders. They have also expressed confidence in the company’s future growth prospects, given its strong brand, diverse product portfolio, and strategic investments.
The dividend payout by Tata Motors is expected to have a ripple effect on other companies in the automobile sector, especially those that are also reporting strong earnings and cash flows. It could also encourage other companies to increase their dividend payouts, which could benefit investors and boost market sentiment.
Tata Motors has been on a strong recovery path over the past year as the COVID-19 pandemic gradually receded in India and the country’s economy started to pick up. The company has been focusing on product launches and upgrading its existing portfolio to meet the evolving demand of consumers in India and overseas. In addition, Tata Motors has also been expanding its EV offerings, which is expected to contribute significantly to its growth in the coming years.
With the rising vehicle demand and increasing market share, Tata Motors is now in a position to reward its shareholders with a dividend payout.
In the report, HDFC Securities said that Tata Motors’ recent launches, such as the Safari and the Altroz, have been well-received by consumers and are expected to contribute significantly to the company’s growth in the near term. In addition, the company’s focus on expanding its EV offerings is also expected to be a key driver of growth, as the Indian government pushes for greater adoption of electric vehicles in the country.
Overall, the dividend payout by Tata Motors marks a significant milestone for the company and its shareholders. It underscores the resilience of the Indian auto industry and the potential for growth and profitability in the coming years.
