Bajaj Auto shares trade in the red even as company amends dividend distribution policy

The dividend distribution will be up to 50 percent in case of surplus funds of up to Rs 7,500 crore, up to 70 percent if it is between Rs 7,500 crore to Rs 15,000 crore and up to 90 percent if it is above Rs 15,000 crore.

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Bajaj Auto share price was trading lower by over a percent in the morning trade on March 19 as the company announced an amendment to its dividend distribution policy.

According to the amendment, “subject to the caveats given in the Policy, the Board shall endeavour to arrive at a dividend pay-out as a percentage of profits after tax on the company’s standalone financials, taking into account the surplus funds available with the company,” the company said in an exchange filing.

“Surplus funds” for this purpose comprises investments in Financial Assets other than in Equity shares of group companies and strategic investments.”

(Photo courtesy: BSE website)  

Prior to the amendment, the policy referred to “dividend payout of around 50 percent of profits after tax on standalone financials, to the extent possible”.

In the new policy, the dividend distribution will be up to 50 percent in case of surplus funds of up to Rs 7,500 crore, up to 70 percent if it is between Rs 7,500 crore and Rs 15,000 crore and up to 90 percent if it is above Rs 15,000 crore.

“The final dividend will be recommended by the Board for approval of the shareholders in a general meeting, while interim dividend, if any, may be declared by the Board. The company currently has only one class of shares, i.e. equity shares,” it added.

Japanese research firm Nomura has maintained buy call on the stock with target at Rs 4,403 per share. It is of the view that sharp increase in payout ratio is likely to improve return on equity. The return on equity can go up from over 25 percent/25 percent to 28 percent/30 percent in FY22/FY23, which is attractive, it said.

“Amended dividend distribution policy can support re-rating of the stock,” it added.

JP Morgan has maintained overweight rating on the stock with target at Rs 4,400 per share. The brokerage firm believes that the dividend payout of up to 90 percent is a welcome move and will imply a 4.5 percent+ dividend payout.

The research firm believes that the buziness model warrants a better valuation multiple adding that PLI and export incentives could be additional catalysts.

The stock was trading at Rs 3,623.50, down Rs 39.95, or 1.09 percent at 10:14 hours. It has touched an intraday high of Rs 3,663.45 and an intraday low of Rs 3,575.

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