No profits to show yet over 20 companies line up large dividend payouts

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26 Aug, 2025 12:21

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Despite posting standalone losses during the fiscal year gone by, several companies have proposed dividend payouts - subject to shareholder approval - and based on ownership ranging from 33-75 percent, promoters stand to receive a significant share as dividend income even as the business failed to post a profit.

While the company law in India allows dividends to be paid only from current year profit, it permits distributions from accumulated earnings under specific conditions.

According to a Moneycontrol analysis, at least 22 companies that posted net loss on a standalone basis in FY25 have declared dividends. Many of these firms had reported profit at the consolidated level due to the performance of their subsidiaries. However, as per the Companies Act, dividend declaration must be based on standalone financials, even though consolidated results are required for disclosure under listing obligations.

The law stipulates that dividends may only be paid from current profit or accumulated reserves. Among the loss-making companies, EID Parry India has declared the highest dividend at 900 percent - equivalent to Rs 9 per share on a face value of Re 1. Edelweiss Financial Services proposed a 150 percent dividend, or Rs 1.50 per share.

In absolute terms, EID Parry plans to distribute Rs 160 crore, with promoters - holding a 41.6 percent stake - receiving nearly Rs 66.6 crore. Edelweiss Financial will distribute Rs 138 crore as dividend, of which over Rs 45 crore will go to promoters holding a 32.7 percent stake. EID Parry had reported a standalone net loss of more than Rs 428 crore, while Edelweiss Financial posted a Rs 52 crore loss for the fiscal year.

Aditya Birla Real Estate and SH Kelkar and Co too have declared dividends of Rs 22.4 crore and Rs 13.8 crore respectively, despite standalone losses of Rs 15 crore and Rs 13.5 crore. Other firms too have announced payouts ranging from Rs 2 lakh to Rs 10 crore.

Interestingly, several companies have declared dividend that surpassed their annual losses. Majestic Auto, which reported a loss of Rs 3.4 crore in FY25, announced a dividend of Rs 10.4 crore, with Rs 7.8 crore going to promoters. IL&FS Investment Managers, Oricon Enterprises, and 63 Moons Technologies reported losses of Rs 2.2 crore, Rs 4.9 crore, and Rs 1.8 crore respectively, yet declared dividends of Rs 8.79 crore, Rs 7.85 crore, and Rs 5.53 crore. Of these sums, promoters of each of the company are set to receive Rs 4.43 crore, Rs 5.16 crore, and Rs 2.52 crore respectively.

Experts have said that loss-making companies must obtain consent from lenders before issuing dividends, as part of regulatory safeguards to prevent imprudent distributions. Additionally, companies - regardless of their profit status - must ensure compliance with statutory requirements and consider strategic factors such as growth plans, stock valuation and geopolitical developments that could impact operating costs before finalizing dividend proposals.

While there is no cap on dividends paid from accumulated profits of earlier years, distributions from general reserves are subject to stricter limits on both quantum and rate. In either case, companies must account for depreciation and adjust any current or past losses before distributing dividends.

Furthermore, dividend payout from general reserves requires shareholder approval, whereas those drawn from prior-year profits may be declared as interim dividends by the board without such approval, experts have said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.