impact of ddt

8/9/2019 Impact of DDT

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CORPORATE FINANCE IIENDTERM PROJECT

2010

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Corporate Finance II END Term Project | Group 3- FMG 18A

1

Contents

Acknowledgement .................................................................................................................................. 2

Executive Summary ................................................................................................................................. 3

Objectives ............................................................................................................................................... 4Methodology ........................................................................................................................................... 5

Data Collection .................................................................................................................................... 5

Classification ....................................................................................................................................... 5

Adjustments ........................................................................................................................................ 6

Statistical Tools ................................................................................................................................... 6

Scope ....................................................................................................................................................... 7

Limitations: ......................................................................................................................................... 7

Introduction ............................................................................................................................................ 8

Dividend Tax considered to be Double Taxation ................................................................................ 8

Historical Background On Dividend Taxation ....................................................................................... 11

Introduction of Corporate Dividend Tax ............................................................................................... 12

Main Provisions Relating to Corporate Dividend Tax ........................................................................... 14

Review of Literature .............................................................................................................................. 15

Irrelevance of Dividends ................................................................................................................... 15

Relevance of Dividends ..................................................................................................................... 16

Payout Trend of Each Sector ................................................................................................................. 19

Empirical Findings (using T-Test) .......................................................................................................... 27

Payout Trend Size Wise ...................................................................................................................... 30

Empirical Findings (using T-Test) .......................................................................................................... 33

Conclusion ............................................................................................................................................. 36

Endnotes ............................................................................................................................................... 36

References ............................................................................................................................................ 36

Appendix .............................................................................................................................................. 38

I.List of Different Sectors before clubbing ........................................................................................ 38

II.Details on Composition of Final 12 Sectors ................................................................................... 39

III.List of those 211 Companies ......................................................................................................... 40


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Acknowledgement

We take this opportunity to acknowledge & express our profound sense of gratitude and

respect to all those who helped us and hence contributed significantly to the completion of

this project.

We would like to offer a sincere thanks to Prof. Himanshu Joshi, Faculty at FORE School of

Management, New Delhi, for his support and guidance for the fulfillment of this term paper.

Thank you.

Group-3

Radhika Gupta

Shivi Aggarwal

Sweta Agarwal

Saket Kumar Singh

Madhusudan Partani


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3

Executive Summary

This study examines the dividend trends of 215 Indian companies over the period 1995-2009

of almost all the sectors like METAL & MINING, AUTO, CAPITAL GOODS, CONSUMER

DURABLES, FINANCE, FMCG, IT, OIL & GAS, POWER, HEALTHCARE etc listed on BSE for which

there was no missing financial information over the period of the study. Thereafter we have

studied the impact of Dividend Distribution Tax (DDT) on dividend policy, specifically on

Dividend Payout Ratio (DPR). Analysis was done for the immediate three years before and

after the tax regime change in 1997 and also for immediate two years before and after

increase in DDT in 2007. For the purpose of this study, the sample was classified on the basis

of industry and size (according to market capitalization). According to tax preference or

trade-off theory, favourable dividend tax should lead to higher payouts. The Union Budget of

1997 made dividends taxable in the hands of the company paying them and not in the hands

of the investors receiving them. The corporate dividend tax aimed at improving the economic

growth and flexibility by eliminating the tax bias against equity-financed investments

thereby promoting saving and investment. The new system aimed at reducing the tax bias

against capital gains in the earlier tax system, encouraging investment, and enhancing the

long-term growth potential of the Indian economy. As compared to the earlier tax regime

where the recipient shareholder paid the tax on the dividend received primarily on the basis

of marginal tax slab rate applicable to him/her (varying between 0% to 30%), in the current

structure of corporate dividend tax, the dividend paying companies pay dividend tax at a flat

rate of 12.5 per cent as of financial year 2005-06. Implicitly, the present corporate dividend

tax regime can be termed as a more favourable tax policy. The analysis of influence of

changes in the tax regime on dividend behaviour reveals the following:

Though the results are somewhat mixed, it can be largely inferred that there is a

significant difference in average dividend payout ratio in the two different tax

regimes for medium sized companies

There are wide industry-wise and size-wise variations in empirical findings visible

over the period of study.

As a result of the introduction of DDT in the year 1997, two sectors namely Metal

and Mining and Finance had significant change in the average DPR. This may be

because Metal and Mining sector is primarily controlled by the public sector

undertakings wherein there is large employee and management ownership of shares

and preference for dividends. After introducing DDT, the management cadre who fall

in the high income group benefitted from lower tax on their dividend income. For the

finance sector it can be reasoned that the East Asia crisis of 1997 may a played some

role. Finance companies might be trying to restore the confidence of HNIs who

benefit from the introduction of DDT more than investors in lower income brackets.


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4

Objectives

The primary Objectives of the study are

To study the impact of implementation of Dividend Distribution Tax in the year 1997

on Payout Policy of Indian companies

To study the impact of an increase in Dividend Distribution Tax to 15% in the year

2007 on the payout policies of Indian companies.

The secondary Objectives are:

To study payout behaviour of different sector over the years

To study the impact of DDT on differently sized firms namely-small, medium and

large


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Methodology

Data Collection

For studying the impact of Dividend Distribution Tax on the trend of Payout Ratios of Indian

corporate sector, we have collected data on the Payout Ratios of some selected companies

for which data was available.

For the study, from all the companies listed in BSE, the companies which are part of Sensex,

BSE TECk, BSE-PSU, Sectoral, Bankex, BSE-Midcap were taken for further consideration.

Initially, we had 512 companies. After deleting the companies which reoccurred, being part

of more than one index, 345 Companies belonging to various sectors were shortlisted.

For the shortlisted companies, data on Dividend Payout Ratio from the year 1995 to 2009

was collected. For the purpose of study only the data from 1995 to 2000 and from 2006 to

2009 was used (DPR for year ending March 2009 is regarded as 2009). Also the Market

Capitalization as on 24th

February, 2010 was collected. Finally, 211 companies were

selected. The companies for which the data was not available even for a single year were

rejected.

Classification

Since, a sector wise analysis is being done, the sector of each selected company was found

out. There were a total of 38 different sectors. For ease of calculation and analysis, sectors

which had less than 5 companies were clubbed under one common head. Finally 12 sectors

were arrived at. The sector heads before and after clubbing and the composition of each

sector after clubbing are provided in appendix.

The objective of the study also includes determining the impact of DDT on different sizes of

firms namely-small, medium and large. The Market Capitalisation as on 24th

February 2010

was used as sorting criteria. The companies having M-Cap less than Rs.5000 crore were

termed as small sized companies, between Rs.5000 Crore and Rs.20000 Crore termed as

medium sized and more than Rs.20000 Crore are termed as large sized companies.


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Adjustments

For certain companies the Financial Year was changed from year ending December to year

ending March, but this doesnt need adjustment in DPR since DPR available is annualised.

In certain cases DPR arrives at negative figure, since the formula used is DPR =

. In

certain cases Companies tend to pay Dividends even though they have made losses. Thus,

even though DPS is positive, EPS turns out to be negative and finally DPR turns out to be

negative. In this case absolute value of DPR has been taken ignoring the sign.

Statistical Tools

For analysing the impact of introduction and enhancement of DDT on the DPR, it is

necessary to use some scientific methods and tools. The implementation of DDT, making

dividend taxable in hands of companies, will change the behaviour of companies and their

dividend payout policy. Thus to validate its influence, Paired T-test (Students test) has been

used. The test has been used twice, once, to study the impact of the implementation of DDT

in the year 1997 and secondly to study the influence of an increase in DDT to 15% in the

year 2007. Thus, the Null Hypothesis is that there is no change in DPR i.e. payout policy of

selected companies due to Implementation of DDT and also due to increase of DDT. Thus

H0: Average DPR for the years 1995, 1996 and 1997 and Average DPR for years 1998, 1999

and 2000 are same. (DPR1=DPR2)

H1: Average DPR for the years 1995, 1996 and 1997 and Average DPR for years 1998, 1999

and 2000 are not same. (DPR1DPR2)

Also,

H0: Average DPR for the years 2006 and 2007 and Average DPR for years 2008 and 2009

are same. (DPR1=DPR2)

H1: Average DPR for the years 2006 and 2007 and Average DPR for years 2008 and 2009

are not same. (DPR1DPR2)

The level of Confidence is at 90%


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Scope

The period of study is from the year 1995 to 2000 and from 2006 to 2009. The data related

to year ending March 1995 (December 1994 in some cases) to year ending March 2009

(December 2008 in some cases) has been taken. The scope was restricted to the companies

listed on the BSE (Bombay Stock Exchange). The study is done for a total of 215 companies

belonging to 38 different Industries (sectors) and for ease of study the number of sectors

was reduced to 12, and rest were clubbed into related sectors or Others.

Limitations:

The use of paired t-Test will just depict whether there was significance difference in

payout trend o companies before and after introduction of DDT, but the positive

impact or negative impact cannot be determined. Thus Graphs are used to depict the

same.

Many companies which are though significant for study were ignored on the basis of

non-availability of data.


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Introduction

Dividend decision has been a subject of enquiry for the financial analysts, academicians, andresearchers for about five decades now. The objective of such a decision is to determine the

extent to which the earnings of a company should be distributed as dividend among the

shareholders and thereby also ascertain the retained earnings. The dividend decision is an

integral part of a companys financial decision-making as it is explicitly related to the other

two major decisions investment and financing decision.

Corporate taxation influences the dividend decision in more than one way. On the one

hand, it influences the net income-after-tax of the company, which, in turn, determines the

capacity of the company to pay dividends, and, on the other hand, it may have implications

for the net value received by the shareholders. In this sense, the structure and the rate of

corporate tax play an important role in determining the dividend policy.

Corporate tax is levied on the income of the company and corporate dividend tax, which is a

form of corporate tax, is levied on the amount of dividend declared, distributed or paid by

the company. In most of the countries, corporate tax has been in the form of tax levied on

net profits/earnings of the company. However, in India, tax is also levied on the dividend

paid by the company or what is termed as dividend tax. A zero-dividend payout is not

uncommon for young rapidly growing companies with good investment opportunities

(Hindustan Times, 2003).

Dividend Tax considered to be Double Taxation

On an average, dividend payout in the US1 has decreased to 30 per cent at present from 60

per cent 30 years ago. However, companies may also be discouraged from paying higher

dividends when these are doubly taxed once in the hands of the company and again in the

hands of the shareholders. Tax exemption is desirable on both dividends and capital gains

that reflect primarily the retained earnings of the company.


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There is a school of thought that argues for tax exemption for dividend income. The basis of

their argument is that taxation of dividend income amounts to double taxation. The

rationale behind this claim is that corporate profits are subject to corporate tax. Since

dividends are paid out of profits, the argument is that the personal income tax paid on

dividend income amounts to a second tax on corporate profits.

This logic is challenged on two grounds. First, there is a legal and logical distinction between

the corporation as an entity and the individual shareholders who own the company. Second,

the tax rates currently in place were set with the knowledge that there was taxation both at

the corporate and the individual level. This means that if there was a moral objection to

double taxation, then, the remedial action would also require an increase in the corporate

tax rate.

On the first point, a corporation is an entity apart from its shareholders for reasons that

have historically been quite important. The law has, in effect, recognized corporations as

legal entities that are distinct from the individuals who happen to own its stock. This is an

important privilege granted by the government for many reasons. First, the limited liability

provided to shareholders means that a corporation might end up imposing damage to

others in pursuit of profit without the individual shareholders being held accountable.

Without the privilege of limited liability granted by the government, every shareholder

could be held fully responsible for all claims against the company.

A second important benefit associated with the corporate form is that the corporation can

act as a legal individual without directly involving its owners. This can be advantageous to

individuals who may wish to earn profit from activities that they would prefer not to be

publicly associated with such as manufacturing guns, selling tobacco, etc. The corporate

form allows individuals to profit from actions that may be viewed by some as otherwise

questionable while preserving their anonymity.

There are other benefits associated with the legal privilege of incorporation but the best

evidence of the value to the individual shareholders of having corporations as separateentities is the fact that corporations exist. Individuals choose to set up corporations (with


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full knowledge of the tax laws) because they view the benefits as outweighing the costs. The

shareholders who feel that the corporate tax is too great a burden have the option of

choosing a partnership or a sole proprietary form of business set-up. In this case, their

income would only be subject to personal income tax. The decision to create a corporation

is a proof of the fact that the benefits associated with this status outweigh the costs in

having corporate income subject to taxation.

Since the corporation is legally and logically a separate legal entity from its shareholders,

there is no logic in the claim that the taxation of dividends amounts to double taxation. The

corporation is subject to taxation in exchange for the privileges granted to it by the

government. The shareholders are subject to tax on their dividend income just as

employees are subject to tax on their salary income. The same income that is, income to

the same people or entity is not being taxed twice. Beyond this logical point on double

taxation, there is the obvious practical point that while setting the corporate tax rate, the

government has been well aware of the fact that dividends are subject to taxation. In other

words, the corporate tax rate was set at its current level with the expectation that the

portion of profits paid out as dividends would also be subject to taxation. If there is a

concern now that the taxation of dividends is an inappropriate form of double taxation,

then the remedy should include raising the corporate tax rate. If the purpose of a cut in the

tax rate on dividends was simply to eliminate the double taxation of dividends, then it

would be coupled with an increase in the corporate tax rate. If there is no accompanying

increase in the corporate tax rate, then the intention must be to increase the amount of

money going to the relatively small number of families who have a significant dividend

income.

Thus, the claim that dividends are subject to double taxation is questionable. In the Indian

context, the imposition of corporate dividend tax on companies making payment of

dividends has in a way resulted in the increase of the corporate tax rate on that portion of

the corporate profit which is distributed among the shareholders. In other words, corporate

profits which are retained are subjected to a lower rate of corporate tax as compared to the

corporate profits that are distributed.


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Historical Background On Dividend Taxation

Till the year 1958-59, an imputation system of taxation was followed in India with respect to

dividends. According to this system, the dividend received by the shareholders was includedin their income after being grossed up and the shareholders were granted credit with

respect to the amount deemed to have been paid by the company on their behalf. In other

words, shareholders had to pay tax on dividend at the rate applicable to them but the

government credited the tax paid by the company on this part of income to the investors.

Thus, that part of the corporate earnings, which was declared as dividend, was taxed only in

the hands of investors. This system of single taxation on dividend was abolished in 1959-601

and dividends were taxed for the second time separately in the hands of shareholders. Over

the years, the investors and the corporate sector complained to the government against

double taxation of income and the government eventually provided a partial relief to

shareholders having low amount of dividend income in the form of deduction under Section

80L from the year 1968-69. As per Section 80L2

of the Income Tax Act, 1961, non-corporate

individual shareholders were granted relief on dividend and certain other income like

interest received from government securities, bank deposits, etc., subject to a ceiling. The

limit, which was increased from time to time, stood at Rs. 12,000 in 1997. In this way, small

investors whose income included income from different eligible savings including

investments in shares were not required to pay any tax on their income if the total income

from all such savings was below Rs. 12,000. Dividend income in excess of this limit was

taxed under the normal rate applicable to the investors. The rate of tax ranged from 15 per

cent to 40 per cent as of 1997 (10% to 30% from 1998 to 2004) depending on the tax

bracket in which the income of the investor fell.3

Companies having dividend income also

enjoyed relief in the form of Section 80M from the financial year 1968-69. According to this

section, in case a company received dividend income from another company and also

declared dividend to its shareholders, the positive difference between the dividend inflow

and the dividend outflow alone was recognized as an income for the company. In other

words, if the amount of dividends paid by a company exceeded its dividend income, the

dividend income was exempted from tax. To summarize, till 1997, dividend income was

taxed in the hands of the shareholders subject to a small relief available to the small

investors.


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Introduction of Corporate Dividend Tax

Both the investors and the corporate sector were expecting the abolition of double taxation

on dividend income ever since the Government of India had initiated financial reforms in

1991. In the budget of 1997, the Finance Minister announced the abolition of tax on

dividend income in the hands of the shareholders. However, the budget proposed a new tax

on the companies when they declared, distributed or paid dividend. While proposing this

new corporate dividend tax, or dividend distribution tax, the government had stated that

the objective of this tax was to discourage companies from increasing the dividend outflow

significantly leading to lower capital formation. While the new tax system exempted the

investors from direct payment of any tax on dividend, it required an indirect payment of tax

on dividend at a prescribed rate. It is difficult to determine whether the tax department

collected a higher amount from dividend distribution tax compared to the earlier regime.

There is no published data available on the amount raised by the government through tax

on dividend income when the recipient shareholders paid tax on it. But, because of the

exemption limits for tax payers in the lower income levels and poor personal tax

administration, the revenue under the earlier system of taxation would be lower than that

collected under the new system. Since the new tax system shifted the responsibility of

paying tax to the companies, administration of the tax on dividend has now become more

efficient and effective. While double taxation of dividends is pervasive, partial to full relief

from this is prevalent in some countries. In most countries, the shareholders have to pay

taxes on the dividends received. The corporate dividend tax aimed to improve economic

growth and flexibility by eliminating the tax bias against equity-financed investments

thereby promoting saving and investment. The new system aimed at reducing the tax bias

against capital gains in the earlier tax system encouraging investment and enhancing the

long term growth potential of the Indian economy. Dividend exclusion, combined with the

elimination of the double taxation of retained earnings, 5 provides an important step

toward reducing tax-based distortions of economic decisions. The change in dividend

taxation has implications for dividend payout policy, debt versus equity financing,

organizational form (including corporate governance), and current versus future

consumption (i.e., saving). A neutral tax policy toward dividends would also provide


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important benefits for corporate governance. Reducing tax barriers to dividend payments

would help provide investors with improved information about the corporate prospects and

reduce the tax-motivated build-up of cash left to the managers discretion. Recognition of

the desirability of providing relief from double tax on corporate income is not new. The

impetus behind the past proposals to integrate the individual and the corporate taxes was

to reduce the economic distortions created by the double tax on corporate income.

In addition, higher investment due to the lower tax on capital income would promote higher

wages in the long run. The proposal would also be expected to enhance near-term

economic growth. While the earlier policy called for tax payments to be made by investors

based on the marginal tax rates applicable to them, the new policy taxed the dividends of

the companies at a uniform rate. The investors now received their dividends tax-free in the

sense that they need not declare their income from dividends in their tax returns or pay a

tax on them. In fact, the investors are implicitly paying a tax since the company pays the

dividend tax and this reduces the amount of funds available for dividend payment by the

company.


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Main Provisions Relating to Corporate Dividend Tax

The following are the salient features of corporate dividend tax as per Section 115-0 of the

Income Tax Act, 1961:

Corporate dividend tax is in addition to the corporate tax paid by the company on its

profits.

Such taxes are levied on any amount declared, distributed or paid by the domestic

company (in India by way of dividends in cash).

The dividend may be declared out of current or accumulated profits.

Corporate dividend tax is payable even if no corporate tax is payable by a company

or its income.

The principal officer of the domestic company and the company shall be liable to pay

the tax on distributed profits to the credit of the central government within 14 days

from the date of declaration, distribution or payment of any dividend whichever is

the earliest.

The tax on distributed profits so paid by the company shall be treated as the final

payment of tax in respect of the amount declared, distributed or paid as dividends

and no further credit, therefore, shall be claimed by the company or by any other

person in respect of the amount of tax so paid.

No deduction under any other provision of Income Tax Act, 1961, shall be allowed to

the company or a shareholder in respect of the amount which has been charged to

tax or the tax thereon.

Thus, the above provisions are mandatory and binding on the companies in order to

avoid payment of penal interest and other stringent aspects of law.


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Review of Literature

There are variations in the tax codes across countries. In many countries, the corporate

source of income (dividend and capital gains) is subjected to double taxation. The double

taxation of corporate income has been criticized on the following grounds:

It distorts the allocation of capital and other resources between corporate and non-

corporate forms of business (Harberger, 1962; Ballentine and McLure, 1980).

It encourages high profit retention and thus avoids the test of marketplace (Poterba,

1987).

It encourages debt over equity financing (Litzenbergerand Van Horne, 1978).

It increases the cost of equity financing and thus reduces investment and capital formation

(Poterba and Summers, 1985).

There are primarily two views on dividend taxation. As per one view, the dividend policy

including the tax factor is irrelevant, i.e., it has no influence on the value of the company.

The alternate view holds that dividend decision is, in fact, relevant and does affect the

shareholders wealth.

Irrelevance of Dividends

In a world with no taxes, the Miller and Modigliani(1961) proposition suggests that dividend

policy is irrelevant to the value of the company. However, when personal taxes are

introduced with a capital gains rate, which is less than the rate on ordinary income, the

picture changed. Friend and Puckett (1964) use cross section data to test the effect of

dividend payout on share value and find that the value of the company is independent of

dividend yield. The Black and Scholes (1974) study presents strong empirical evidence that

the before tax returns on common stocks are unrelated to corporate dividend payout policy.

They adjust for risks by using the capital asset pricing model (CAPM) and come up with a

strong conclusion that it is not possible to demonstrate, even by using the best empirical

methods that the expected returns on high yield common stocks differ from the expected

returns on low yield common stocks either before or after taxes.


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Miller and Scholes (1977) argue that even with the existing laws (where the tax on ordinary

personal income is greater than the capital gains tax), there is no need for the individuals

ever to pay more than the capital gains rate on dividends. The implication is that individuals

could be indifferent towards payments in the form of dividends or capital gains (if the

company decides to repurchase shares). Thus, the companies value will be unrelated to its

dividend policy. Both the Friend and Puckett (1964) and Black and Scholes (1974) studies

tend to support the conclusion that the value of the company is independent of the

dividend yield.

Relevance of Dividends

Before 1997, there was double taxation of profit earned by the companies once in the hands

of the company through corporate tax and then in the hands of the investors in the form of

income tax. In such a case, the investor should prefer to get less dividend paid and the

earnings to be retained by the company as they can always get the amount by selling the

shares in the equity market in the form of home made dividend ( Black, 1976). Taking this

argument, the taxation policy is considered a key determinant of dividend payout in the

developed countries and the dividend decision is a relevant decision (Short, Keasey and

Duxbury, 2002).

Three important studies (Bhattacharya, 1979; Miller and Rock, 1985; andJohn and William,

1985) focusing on the relationship between dividend payout and corporate tax questioned

the rationale of the old view that dividend taxation affects the shareholders optimal

dividend payout ratios. Dividend results in an immediate tax liability for shareholders. These

studies emphasized the need to distribute dividend even if it leads to higher tax liabilities for

shareholders. The primary explanation for this was that dividend sends a signal to the

shareholders about the future prospects of the company. Another study (Hakansson, 1982)

strengthened the view that the raising and lowering of dividends communicates

information (to shareholders) over and beyond what is provided by earnings reports,

forecasts, and other announcements. However, no study seems to have any explanation as

to why dividends are better (and more expensive!) signals regarding future prospects (Black


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and Scholes, 1974; Black, 1976; and Ambarish, et al., 1987). Another rationale behind

dividend distribution in spite of tax implication is provided by the view that shareholders are

not sufficiently well informed about whether or not management is acting in their best

interests (Crockett and Friend, 1988). Dividend distribution is further justified in the study by

Easterbrook (1984). He observed that dividend payouts ensure that companies go to the

capital markets to seek funds for new capital requirements. Market mechanisms ensure that

managers are acting in the best interests of shareholders. Ofer and Thakor (1987) offer

another explanation for dividend distribution: If managers are shareholders, they personally

prefer dividends to share repurchases since most companies forbid managers from

tendering their shares. Thus, the only way managers can get cash disbursement from their

shares is through dividends and they may be willing to impose a tax cost on other

shareholders (and themselves) to get the cash. Perhaps the most widely tested explanation

of dividends is known as the clientele hypothesis (Gordon and Bradford, 1980). Some

important groups of shareholders may prefer dividends to capital gains because dividends

provide cash flow and, for these shareholders, there is little or no tax advantage from

capital gains. The most important group comprises the non-taxable institutions but

individuals with low marginal tax rates and other corporate shareholders are also in the

low-tax clientele. These shareholders will own stocks in the companies with high dividend

payout ratios while other shareholders (the high-tax clientele) will invest in companies with

low payout ratios. Empirical evidence regarding the clientele hypothesis has been mixed.

Studies that find clientele effects include Pettit (1977), Gordon and Bradford (1980), and

Scholz (1989). The studies providing contradictory evidence include Long (1978),

Litzenberger and Ramaswamy (1979, 1982), Hess (1982), Auerbach (1983), Poterba and

Summers (1984), Poterba (1987), and Blume and Friend(1987). The contemporary literature

on dividend policy offers evidence of irrelevance of dividend tax in dividend policy. It is

argued that dividend taxes get capitalized into the value of the company (King, 1977 and

Bradford, 1981). The major drawback in this theory is that it fails to deal adequately with

the possibility of periodic share repurchases. However, contradictory empirical evidence is

provided by the study of Poterba and Summers (1985). The controversy between these

views continues to be the main focus of research on dividend taxation. In India, this issue

has not received adequate attention of researchers so far. It is Lintners model (1956) which


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has been the focus of empirical studies in the Indian context. Much work does not seem to

have been carried out on other aspects of dividend policy in India.

However, a few studies have been carried out including those of Majumdar(1959), Nigam

and Joshi (1961), Purnanandam (1966), Rao and Sharma (1971), Gupta (1973),

Krishnamurthy and Shastry(1975), Dhameja (1976), Murty(1976), Bhat and Pandey(1994),

Ojha (1978), Khurana (1980), and Mishra and Narender(1996). Most of these studies have

primarily focused on identifying the factors influencing dividend payouts in the Indian

corporate sector and only indirect references have been made to the impact of tax on

dividend policy. However, Narasimhan and Asha (1997) discuss the impact of dividend tax

on dividend policy of companies. They observe that the uniform tax rate of 10 per cent on

dividend as proposed by the Union Budget, 1997-98, alters the demand of investors in

favour of high payouts rather than low payouts as the capital gains are taxed at 20 per cent

in the said period. A study by Reddy (2002) has shown that the trade-off or tax preference

theory does not appear to hold true in the Indian context. Another study by Narasimhan

and Krishnamurti (2004) finds no clear evidence that companies altered their dividend

payout policy in response to the introduction of corporate dividend tax in India. Being able

to precisely spell out the relation between corporate tax and dividend policy would be

advantageous to most of the diverse groups which are likely to be affected in the process.

For instance, the shareholders may be able to understand the dividend behaviour of a

company in response to any proposed change in corporate taxation. In addition, the

shareholders may be able to anticipate the amount which they are likely to receive as

dividend. It will also help the management in identifying and evaluating potential growth

strategies, expansion opportunities or prepare a defence against possible future adverse

developments. As far as the policy-makers are concerned, the study may provide the much

needed respite that introduction of corporate dividend tax in India in 1997 has contributed

positively towards the declaration of dividends. The change in tax policy with respect to

dividends can be considered as an interesting experiment in corporate finance with few

parallels. The policy change may have a bearing on the wealth of investors on the one hand

and the cost of equity of the companies on the other. This may, in turn, influence dividend

payout policy and capital structure of the companies.


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19

Payout Trend of Each Sector

Of the total 211 Companies selected for the study, these have been divided into 12 sectors,namely Auto, Capital Goods, Consumer Durables, Finance, FMCG, Health care, IT, Metal and

Mining, Oil and Gas, Others, Power and Realty. The composition of each sector is as follows

The Others Sector has 50 companies because many sectors are clubbed into that. The

details of clubbing are provided in appendix.

Auto,

15 CapitalGoods, 31 Consumer

Durables, 6

Finance, 34

FMCG, 14

Healthcare, 14

IT, 9

Metal &

Mining, 12

Oil & Gas, 11

Others, 50

Power, 6 Realty, 9

Sector Composition


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20

The average Dividend payout ratio in this sector is between 25% and 40%. Since there are

many capital expenses and also availability of growth opportunities, payment of dividend islow which minimises the DPR. There has been a steep rise in average DPR of the sector in

the year 2002 because Escorts Ltd, which was a non payer earlier, started paying dividends

and also Maruti Suzuki, which used to pay around 8% DPR, has now moved to 40%. The

steep increase in the year 2002 and minor fall in the 2003 could be due to Abolishment of

DDT in 2002 and reintroduction of the same in 2003.

One of the basic features of capital goods sector is that it has large growth opportunities.

Thus The DPR seems to be in a range of 18% to maximum of 47% in year 2002. The steep

increase is due to special dividends declared by Shree Cements. This has lead to increase in

DPR to 644%. This implies the company has paid 6.44 times the earnings it has actually

made, as dividends to its shareholders. This signifies that there was no investment

opportunity, so the management decided to go for huge dividends. Also abolishment of DDT

could also be the reason.

0%

10%

20%

30%

40%

50%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Auto

DPR(%)

0%

10%

20%

30%

40%

50%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Capital Goods

DPR(%)


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21

The DPR trend has been more or less constant. The increase in the year 2001 is because ofrecession. During the recession, the companies go for dividends payout so that the interest

of shareholders can be retained and the morale can be boosted. Also the absence of

investment opportunities makes the management to go for dividend payout. In the year

2002 Tata Communications had the DPR of 209% further leading to increase in median DPR.

The average DPR in all the three sectors is more or less consistent at 20%. There has been

steep increase in Large Companies DPR; this is because of IFCI paying out 557% as its DPR.

Also in the case of Medium companies, the steep increase in DPR in the year 2003 is

because of JM Financials paying 1037% of its earnings as dividends.

0%

10%

20%

30%

40%50%

60%

70%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Consumer Durables

DPR(%)

0%

20%

40%

60%

80%

100%

120%

140%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Finance

DPR-Large

DPR-Medium

DPR-Small


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22

If Inter-size comparison is made, in the year 1997, when the DDT i.e. Dividend Distribution

Tax was implemented making dividends taxable for companies paying them, the payment of

dividend fell for medium and small companies. But this trend was not visible in dividend

payout ratio of large companies. But in the year 2003 and 2007, where the DDT was re-

introduced at 12.5% and further 15%, respectively, there has been no influence in payout

ratio and the trend.

The average DPR of this sector, unlike other sectors like Capital goods, Auto etc, is high. The

reason is simple that, the FMCG is not a growth sector and also the capital investment

requirement is low. Thus the average DPR is in range of 37% to 57%. In the year 2001, FMCG

firms were regarded as the top dividend paying firms. Companies like Nestle India Ltd,

Colgate Palmolive (India) Ltd. paid DPR of as high as 118% and 219% respectively.

0%

10%

20%

30%

40%

50%

60%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

FMCG

DPR(%)


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23

The average DPR for Healthcare sector is ranging between 20% and 40%. It is observable

that the dividends are very much fluctuating, which implies that the industry takes dividend

as passive, and the dividends are paid only when there is no investment opportunities. Thus

the DPR ranges from as high as 114% to as low as 6%. The continuous fall after 2007 may be

because of increase in DDT to 15% and also investment opportunities in R&D.

Information Technology, which is regarded as one of the growing sector with very attractive

investment opportunities, has a very low average DPR. This is also visible from the DPR of

the companies. It is in the range of 6% to 34%. In the year 2006, there has been steep

increase in the DPR. This is because Moser Bear had DPR of 359%, GTL had 486% and

TechMahindra also had a DPR of 500%. Thus, leading to an overall sector average of 200%.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Healthcare

DPR(%)

0%

50%

100%

150%

200%

250%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

IT

DPR(%)


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24

There have been no steep increases or falls. The DPR has been consistent and ranging from

15% to 25%. This signifies that the fixed dividend payout policy is in practice. But the

implementation of DDT has no impact on the sector. In fact no other sector has the impact.

The fall in the year 2003 could be credited to the fact that the DDT after its abolishment in

2002 was re-introduced by Finance Act, 2003.

No steep increases in this sector. The range of DPR is 13% to 28%. Since there is necessity to

maintain reserves for unseen uncertainties, these companies prefer paying low dividends

and have a high retention ratio.

0%

5%

10%

15%

20%

25%30%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Metal and Mining

DPR(%)

0%

5%

10%

15%

20%

25%

30%

35%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Oil&Gas

DPR(%)


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25

Since many sectors like Textile, Agriculture, Plastic goods, Diversified are part of this sector,

no conclusion can be made out of this DPR trend. But the DPR had risen in the year 1999

because of Century Textiles which had payout of 1037% and in the year 1999, the increase is

credited to Kesoram cements which paid 1700% of its EPS as DPS.

Being a high growth sector, the DPR of this sector is ranging between 18% and 36%. But in

this sector too there has been no impact of either implementation of DDT and increase in

DDT rate.

0%

10%

20%

30%

40%

50%

60%

70%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Others

DPR(%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Power

DPR(%)


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26

The realty sector saw a transition from low growth sector to a very high growth sector. The

DPR trend too depicts the same. The DPR in the year 1995 was at 34% and then it kept on

falling and reached to 10% in the year 2009. The companies in this sector retain the earnings

and reinvest the same in the business instead of paying it out. The actual rate of return on

investments is more than the opportunities cost to the shareholder.

0%

5%

10%

15%

20%

25%30%

35%

40%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Realty

DPR(%)


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27

Empirical Findings (using T-Test)

For 1997(Introduction of DDT)

To determine the impact of the introduction of the Dividend Distribution Tax in the Union

Budget of 1997, the paired sample T-test was conducted on 211 firms categorized in 12

sectors. On the basis the comparison between the calculated and the critical T-values, any

significant impact of Dividend Distribution Tax on the Dividend Payout Ratio (DPR) can be

seen.

Significance Level is 90%. Accordingly, = 0.10

General rule:

If P-value>; Accept the null hypothesis

If P-value


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28

For all the 10 sectors we find that the P-value>. Therefore, we accept the null hypothesis

that there is no significant change in the average DPR Before due to the change in the tax

regime policy in 1997.

For the 2 sectors namely, Metal and Mining and Finance the P-value


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29

For 10 sectors where the P-value > alpha, we can say that the null hypothesis is accepted,

i.e. there is no significant change in the average DPR after the introduction of dividend

distribution tax. But, in IT and O&G sector, we see that P-value< alpha, so we reject the null

hypothesis, i.e. there is significant difference in the average DPR after the introduction DDT.

IT sector: The Return on equity of IT sector is very high compared to other sectors of Indian

economy. Before 2003 the profitability of the IT firms was scanty and consequently this

sector was at the bottom of the list in terms of dividend payment. The average payout of

the IT sector during this period was 21.53%.This can be attributed two factors .Firstly, the

industry presented immense growth opportunities for the companies hence the managers

were of opinion that they can provide the investors better returns if they plough back the

earnings into business. Secondly, most firms in Industry were facing volatile earnings stream

which deterred them from paying more dividends. After 2003, there was a substantial spurt

in dividend payout ratios of the IT companies. Infosys Technologies, Wipro Technologies,

HCL Technologies were among the highest dividend paying companies. Infosys Technologies

paid as high dividend as 2590% in the year 2004.This surge in dividend can be attributed to

high profitability and subsequently high liquidity of IT companies.

IT sector is a human intensive sector and do not require huge capital asset base like

manufacturing companies for their operations. The major asset of this sector is manpower.

Therefore the funds required for recruitment and retention of manpower is comparatively

less than funds required for purchasing capital assets. So these firms can easily release funds

for payment of dividends. Thus, we can conclude that IT firms in India have high liquidity

and it is an important determinant of dividend payout ratio. Since the profitability of the

companies is also very high so even if there is year to year variability in the earnings of the

firms they can easily pay huge dividends.


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30

Payout Trend Size Wise

The shortlisted companies which are further divided into large sized segment, medium sized

segment and small sized segment based the Market capitalization criteria. The companies

with less than Rs 5000 Crs. were sorted as Small size, with market capitalization of Rs. 20000

Crs as large size and rest into medium size.

Large, 41

Medium, 57Small, 113

Size-wise Composition


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31

The Companies in this sector have the market capitalisation of more than Rs. 20000 Crores.

The DPR of these is more or less constant in between the range of 19% to 37%. There has

been increase in Dividends payment and DPR in the year 2001. This is because of downturn

faced during that time. The companies prefer paying the dividends because of lack of

investment opportunities and also to boost up the morale of investors. The DPR is also high

because of low denominator in the form of Earnings but the numerator in form of dividends

is either constant or increases.

Also there has been no impact of Introduction of DDT in the year 1997 and increase in DDT

rate in the year 2007. In fact there has been increase in payout in the year 1997 and

onwards. The Increase in DPR Trend in the year 2002 is because of abolishment of DDT i.e.

Dividends are taxable in hands of investors and not the company. There is fall in Payout

trend in the year 2003; this could be due to re-introduction of DDT by Finance Act 2003.

0%

5%

10%

15%

20%

25%30%

35%

40%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Large

Large


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32

The range of Dividend Payout ratio for this sector, which has companies with market

capitalisation in between Rs. 5000 Crores and Rs.20000 Crores, is between 25% and 48%.

The companies with market capitalization less than Rs. 5000 crores are comprised in this

segment. The Payout trend of these firms is very much fluctuating. This is because the

companies are characterised by low cash reserves and there is high co-relation between

Cash profits and dividends of the companies. Thus this leads to fluctuating payout ratio. In

the year 1997, the fall can be credited to the account of introduction of Dividend

Distribution Tax, making the dividends taxable in the hands of companies paying them. In

the year 2001, where large and medium sized firms preferred paying dividends, the small

firms paid low dividends because of non availability of cash profits.

0%

10%

20%

30%

40%

50%

60%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Medium

Medium

0%

5%

10%

15%

20%

25%

30%

35%

40%

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Small

Small


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33

Empirical Findings (using T-Test)

For 1997(Introduction of DDT)

Sector 1997 N Mean SD T-value P-value

LargeBefore 41 20.67 14.83

-2.97* 0.005*After 41 26.85 19.87

MediumBefore 57 26.74 18.58

-2.14* 0.036*After 57 32.53 25.23

SmallBefore 113 27.88 36.22

-0.16 0.87After 113 29.02 62.79

From the results of t-Test it is clearly visible that there has been no influence in Payout ratio

of Small sized companies due to introduction of DDT. Since the p-Value of large sized and

Medium sized companies are less than (0.1), this implies that the null hypothesis of there

is no significant influence of DDT on DPR is rejected. Thus we can infer that there has been

significant influence of DDT on the Payout trend of these companies.

For 2007(Increase in DDT to 15%)

Sector 2007 N Mean SD T-value P-value

LargeBefore 41 29.79 19.15

1.03 0.311After 41 28.75 22.44

MediumBefore 57 36.85 37.66

1.81* 0.076*After 57 28.64 19.71

Small

Before 113 27.2 33.89

1.07 0.288After 113 23.56 26.33

From the Table of results of T-test, it is clearly noticeable that the p-value of Medium sized

companies is less than 0.1 (). This entails that there was significant influence of increase in

DDT to 15% on the payout trend of these companies. Also there was no impact of the same

on payout trend of large and small sized companies.


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34

ConclusionSuccessive Finance Ministers have realised that measured spraying of DDT - Dividend

Distribution Tax - in Budgets is like providing a huge tax net over an entire corporate sector.

DDT is a tax on distributed dividend and not exactly on income. Since its introduction in

1997, DDT has been in the thick of controversy. After exempting dividend income in the

hands of shareholders, the loss in revenue is being made good by collecting DDT from

companies. A shareholder would prefer his overall tax liability computed after taking all

aspects into account rather than be taxed under the thumb-rule, that is, DDT.

Otherwise, one sector which is perennially cash-strapped is made to pay DDT, when, in fact,

it need not pay. The profit-making government-owned companies declare dividends and pay

the same to the Government. As the Government is not a taxable entity, no tax is deducted

at source when dividend income is distributed (when dividend income was taxable). Since

DDT is a measure consequent to the exemption of dividend income from taxation, to offset

the revenue loss, the measure should have been confined to dividend distributed among

taxable shareholders.

To make the public sector pay, DDT on dividend distributed to the Government is

unreasonable and illogical. Public sectors companies, such as Bank of India, Canara Bank,

State Bank of India, ONGC, VSNL, MTNL, IOC and HAL, have been made to shell out huge

sums as DDT. For obvious reasons, these companies will not protest.

Moreover, after the amendments introduced by the Finance (No.2) Act, 2004, as far as a

shareholder is concerned, he is indifferent between equity dividend income and long-term

capital gains on equity shares as both are exempt in his hands. However, from the

companys point of view, retentions are still better as in such a scenario the company can

avoid payment of Corporate Dividend Tax. One of the strongest arguments in the favour of

DDT is that it doesnt let shareholders having huge stakes in the company go off without

paying taxes on their incomes.


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35

Thus we can conclude that, though the Dividends were made taxable in the hands of

companies paying the dividends, thus has no impact on the payout trend of the companies.

Only few sectors had the impact of the same. Thus the tax-Preference theory which states

that companies and also share holders prefer to have capital gain instead of dividends.

Because the capital gains on equity shares are exempted from Taxes whereas dividends are

taxable at 15%.

The argument extended against DDT is that it leads to double taxation. First, as income tax

on the profits earned by the companies, then secondly, as DDT on dividends which is paid

out of profits lest after paying the income tax. The profits of a company are supposed to be

the income of shareholders. This way they, as part owners i.e. the shareholders, havealready been taxed.

Under the current Taxation system, when a subsidiary company pays dividend to its parent

company, it pays dividend distribution tax. When the parent company pays dividend to its

shareholders, probably utilizing all of its dividend receipts, it further pays dividend

distribution tax again on the same funds. This leads to double taxation, which should have

been resolved by taxing dividend in the hands of the shareholder. The worst hit is the group

companies or the chain investment companies, which will be subject to DDT more than once

to distribute its profits to the ultimate shareholders. It is important that shareholders get

fair returns on their equity holdings in a company. Otherwise they would prefer to choose

investing through other alternative means. Moreover, it creates a bias in favor of

undistributed profits against distributed profits. India needs to reduce the overall incidence

so as to make Indian companies competitive in the international market. DDT encourages

retention of profits in the hands of the company. It severely effects the capital formation

and development in a country where capital is scarce and liquidity is one of the essential

requirements of an economy. But it is equally important that shareholders get fair return on

their equity holdings. Also keeping in mind the present policy of globalization, high

corporate tax and less investment will make Indian companies suffer in the international

market.


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36

Endnotes

1. Sections 67 and 68 of Part B of the Union Budget 1959-60 of the Government of India.

2. Section 80L was inserted by the Finance (No.) 2 Act, 1967 with effect from assessment

year 1968-69.

3. Even if the dividend income along with other qualified income exceeds Rs. 12,000, for

individual investors, whose income from all sources including dividend income is equal to or

below Rs. 60,000, no tax is levied and these small investors thus escape from any tax on

dividend income.

References

1. Monica Singhania (2006), Taxation and Corporate Payout Policy, Vikalpa (Volume

31 No. 4).

2. Monica Singhania (2005),Trends in Dividend Payout, Journal of Management

Research (Volume 5, No. 3).

3. Bhat, R and Pandey, I M (1994). Dividend Decision: A Study of Managers

Perceptions, Decision, 21(1/2), 67-86.

4. Hindustan Times (2003). Dividend Taxation Slows CorporateGrowth, January 20.

5. The Economic Times (2010). Should dividends be taxed in investors' hands?

January 28.

6. Business Standard (2010), A case for withdrawal of dividend distribution tax

February 25.

7. Baker, H. Kent, E.T. Veit and G.E. Powell (2001), Factors Influencing Dividend PolicyDecisions of Nasdaq Firms, The Financial

8. Review36(3): 19-38.

9. Narasimhan, M S and Krishnamurti (2004). The Role of Personal Taxes and

Ownership Structure on Corporate Dividend Policy, unpublished paper.

10.Reddy, Y Subba (2002). Dividend Policy of Indian Corporate Firms: An Analysis of

Trends and Determinants, NSE Research Initiative, Serial No.19.

11.Dividend Tax, Wikipedia.com


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12.Ebscohost.com

13.Capitaline.com

14.http://www.thehindubusinessline.com/2007/03/09/stories/2007030901060900.htm

15.http://www.thehindubusinessline.com/2000/04/01/stories/120164su.htm16.http://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-

amount-to-Double-taxation.html
http://www.thehindubusinessline.com/2000/04/01/stories/120164su.htmhttp://www.thehindubusinessline.com/2000/04/01/stories/120164su.htmhttp://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-amount-to-Double-taxation.htmlhttp://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-amount-to-Double-taxation.htmlhttp://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-amount-to-Double-taxation.htmlhttp://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-amount-to-Double-taxation.htmlhttp://www.legalserviceindia.com/article/l187-Does-Dividend-Distribution-Tax-amount-to-Double-taxation.htmlhttp://www.thehindubusinessline.com/2000/04/01/stories/120164su.htm


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AppendixI. List of Different Sectors before clubbing

Sector No. of

Companies

Sector No. of

Companies

Agriculture 1 Logistics 2

Agro Chem 2 Media and

Entertainment

4

Auto 13 Metal 8

Auto Ancillary 1 Mining 4

Banks 3 Misc. 5

Capital Goods 22 Oil & Gas 10

Cement 2 Others 8

Chemicals 5 Packaging 1

Consumer Durables 3 Paints 2

Diversified 5 Petrochemicals 1

Edible Oil 1 Pharma 5

Fertilizers 5 Plastic products 1Finance 33 Power 8

FMCG 14 Realty 8

Gas Distribution 1 Retail 1

Healthcare 14 Shipping 1

Hotels 3 Steel 1

Housing related 2 Telecom 3

IT 10 Transport 2


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39

II. Details on Composition of Final 12 Sectors

Assigned Sector Actual Sector Assigned

Sector

Actual Sector

Auto Auto OthersAgriculture

Auto ancillaries-Electrical Agro Chemicals

Chemicals

Capital Goods Capital Goods Diversified

Cement Edible Oil

Housing Related Fertilizers

Steel Gas Distribution

Transport Services HotelsLogistics

Consumer Durables Consumer Durables Media &

Entertainment

Telecom Miscellaneous

Others

Finance Banks Packaging

Finance Paints

Petrochemicals

FMCG FMCG Pharma

Plastic Products

Healthcare Healthcare Retail

Shipping

IT Information Technology

Power Power

Metal & Mining Metal

Metal, Metal Products &

Mining

Realty Realty

Oil & Gas Oil & Gas


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40

III. List of those 211 Companies

Sr. No Code Name Sector

1 523204 Aban Offshore Ltd. Oil & Gas

2 500002 ABB Ltd. Power

3 500410 ACC Ltd. Capital Goods

4 505885 Alfa Laval (India) Ltd. Capital Goods

5 532480 Allahabad Bank Finance

6 520077 Amtek Auto Ltd. Auto

7 532418 Andhra Bank Finance

8 500013 Ansal Properties & Infrastructure Ltd Realty

9 508869 Apollo Hospitals Enterprises Ltd. Healthcare

10 500877 Apollo Tyres Ltd. Auto

11 500477 Ashok Leyland Ltd. Auto

12 531847 Asian Star Co. Ltd. Others

13 506820 Astrazeneca Pharma Ltd. Others

14 526991 Atlas Copco (India) Ltd. Capital Goods

15 524804 Aurobindo Pharma Ltd. Healthcare

16 500674 Aventis Pharma Ltd. Others

17 532215 AXIS Bank Ltd. Finance

18 500032 Bajaj Hindustan Ltd. Others19 500490 Bajaj Holdings & Investment Ltd. Auto

20 500038 Balrampur Chini Mills Ltd. Others

21 532134 Bank of Baroda Finance

22 532149 Bank Of India Finance

23 532525 Bank of Maharashtra Finance

24 500041 Bannari Amman Sugars Ltd. Others

25 506285 Bayer Cropscience Ltd. Others

26 500048 BEML Ltd. Capital Goods

27 509480 Berger Paints India Ltd. Others

28 503960 Bharat Bijlee Ltd. Capital Goods

29 500049 Bharat Electronics Ltd. Capital Goods

30 500493 Bharat Forge Ltd. Auto

31 500103 Bharat Heavy Electricals Ltd. Capital Goods

32 500547 Bharat Petroleum Corp. Ltd. Oil & Gas

33 500055 Bhushan Steel Ltd. Capital Goods

34 526853 Bilcare Ltd. Healthcare

35 500335 Birla Corporation Ltd. Capital Goods


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41


36 526612 Blue Dart Express Ltd Others

37 500067 Blue Star Ltd. Consumer Durables

38 523457 BOC India Ltd. Others

39 500530 Bosch Ltd. Auto

40 500825 Britannia Industries Ltd. FMCG

41 532483 Canara Bank Finance

42 500870 Castrol India Ltd. Others

43 500040 Century Textiles & Industries Ltd. Others

44 500084 CESC Ltd. Power

45 500085 Chambal Fertilisers & Chemicals Ltd. Others

46 500110 Chennai Petroleum Corporation Ltd. Oil & Gas

47 500087 Cipla Ltd. Healthcare

48 500830 Colgate Palmolive (India) Ltd. FMCG

49 531344 Container Corporation of India Capital Goods

50 506395 Coromandel International Ltd. Others

51 532179 Corporation Bank Finance

52 500092 CRISIL Ltd. Others

53 500093 Crompton Greaves Ltd. Power

54 500480 Cummins India Ltd. Auto

55 500096 Dabur India Ltd. FMCG

56 532121 Dena Bank Finance

57 532868 DLF Ltd. Realty

58 500124 Dr Reddy's Laboratories Ltd. Healthcare

59 523618 Dredging Corporation of India Capital Goods

60 500125 E.I.D. Parry (I) Ltd. Others

61 500840 EIH Ltd. Others

62 505700 Elecon Engineering Co. Ltd. Capital Goods

63531162 Emami Ltd. FMCG

64 532178 Engineers India Ltd. Others

65 530323 Era Infra Engineering Ltd. Realty

66 500495 Escorts Ltd. Auto

67 500134 Essar Oil Ltd Oil & Gas

68 500086 Exide Industries Co. Ltd. Auto

69 500469 Federal Bank Ltd. Finance

70 526881 Financial Technologies (I) Ltd. IT

71 532155 Gail (India) Ltd. Oil & Gas

72 509550 Gammon India Ltd. Capital Goods


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42


73 500676 GlaxoSmithKline Consumer Healthcare FMCG

74 500660 GlaxoSmithKline Pharmaceuticals Ltd. Healthcare

75 500163 Godfrey Phillips India Ltd FMCG

76 500164 Godrej Industries Ltd. Others

77 500300 Grasim Industries Ltd. Others

78 500620 Great Eastern Shipping Co. Ltd. Others

79 500160 GTL Ltd. IT

80 500173 Gujarat Fluorochemicals Ltd Others

81 523477 Gujarat Gas Company Ltd. Others

82 532181 Gujarat Mineral Development Corp. Metal & Mining

83 500670 Gujarat Narmada Val Fer Co. Ltd. Others

84 517354 Havells India Ltd. Capital Goods

85 500010 HDFC Finance

86 500180 HDFC Bank Ltd. Finance

87 500182 Hero Honda Motors Ltd. Auto

88 500183 Himachal Futuristic Comm. Consumer Durables

89 500440 Hindalco Industries Ltd. Metal & Mining

90 500185 Hindustan Construction Co Ltd Realty

91 500186 Hindustan Oil Exploration Co. Ltd. Oil & Gas

92 500104 Hindustan Petroleum Corp Ltd. Oil & Gas

93 500696 Hindustan Unilever Ltd. FMCG

94 500188 Hindustan Zinc Ltd. Metal & Mining

95 500193 Hotel Leela Venture Ltd. Others

96 500710 ICI India Ltd. Others

97 532174 ICICI Bank Ltd. Finance

98 500106 IFCI Ltd. Finance

99 530005 India Cements Ltd. Capital Goods

100500850 Indian Hotels Co. Ltd. Others

101 530965 Indian Oil Corporation Ltd. Oil & Gas

102 532388 Indian Overseas Bank Finance

103 532187 IndusInd Bank Ltd. Finance

104 500116 Industrial Dev Bank of India Finance

105 500209 Infosys Technologies Ltd. IT

106 531807 ING Vysya Bank Ltd. Finance

107 524494 Ipca Laboratories Ltd. Healthcare

108 500875 ITC Ltd. FMCG

109 530773 IVRCL Infrastructures & Projects Ltd. Realty


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110 512237 Jai Corp Ltd. Metal & Mining

111 500219 Jain Irrigation Systems Ltd Others

112 500378 Jindal Saw Ltd. Metal & Mining

113 523405 JM Financial Ltd Finance

114 500228 JSW Steel Ltd Metal & Mining

115 530019 Jubilant Organosys Ltd. Others

116 513250 Jyoti Structures Ltd. Capital Goods

117 526209 K.S.Oils Ltd. Others

118 522287 Kalpataru Power Transmission Capital Goods

119 500165 Kansai Nerolac Paints Ltd. Others

120 532652 Karnataka Bank Ltd. Finance

121 502937 Kesoram Industries Ltd. Others

122 500241 Kirloskar Brothers Ltd. Capital Goods

123 500243 Kirloskar Oil Engines Ltd. Capital Goods

124 500247 Kotak Mahindra Bank Ltd. Finance

125 500252 Lakshmi Machine Works Ltd. Capital Goods

126 500510 Larsen & Toubro Limited Capital Goods

127 500253 LIC Housing Finance Ltd Finance

128 500257 Lupin Ltd. Healthcare

129 500260 Madras Cements Ltd. Capital Goods

130 500108 Mahanagar Telephone Nigam Ltd. Consumer Durables

131 500265 Maharashtra Seamless Ltd. Capital Goods

132 500520 Mahindra & Mahindra Ltd. Auto

133 500109 Mangalore Refinery & Petro Ltd. Oil & Gas

134 531642 Marico Limited. FMCG

135 532500 Maruti Suzuki India Ltd. Auto

136 500271 Max India Ltd. Others

137513377 MMTC Ltd. Others

138 524084 Monsanto India Ltd. Others

139 517140 Moser-Baer (India) Ltd. IT

140 517334 Motherson Sumi Systems Ltd. Auto

141 526299 Mphasis Ltd. IT

142 500290 MRF Ltd. Auto

143 500294 Nagarjuna Construction Co Ltd. Realty

144 500075 Nagarjuna Fertiliser & Chem. Ltd. Others

145 532234 National Aluminium Co. Ltd. Metal & Mining

146 500790 Nestle India Ltd. FMCG


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147 500304 NIIT Ltd. IT

148 500308 Nirma Ltd. FMCG

149 526371 NMDC Ltd. Metal & Mining

150 500672 Novartis India Ltd. Others

151 532555 NTPC Ltd. Power

152 500312 ONGC Ltd. Oil & Gas

153 532466 Oracle Financial Services Software Ltd. IT

154 524372 Orchid Chemicals Pharmaceuticals Healthcare

155 500315 Oriental Bank of Commerce Finance

156 523574 Pantaloon Retail (India) Ltd. Others

157 531120 Patel Engineering Ltd. Realty

158 503031 Peninsula Land Ltd. Realty

159 500680 Pfizer Ltd. Healthcare

160 500331 Pidilite Industries Ltd. Others

161 500302 Piramal Healthcare Ltd. Healthcare

162 532898 Power Grid Corporation of India Ltd. Power

163 522205 Praj Industries Ltd. Capital Goods

164 500459 Procter & Gamble Hygiene & Health FMCG

165 532461 Punjab National Bank Finance

166 531500 Rajesh Exports Ltd. Consumer Durables

167 500359 Ranbaxy Laboratories Ltd. Healthcare

168 524230 Rashtriya Chem & Fert. Ltd. Others

169 523445 Reliance Industrial Infrastructure Ltd. Capital Goods

170 500325 Reliance Industries Ltd. Oil & Gas

171 500390 Reliance Infrastructure Ltd. Power

172 500366 Rolta India Ltd. IT

173 500368 Ruchi Soya Industries Ltd. FMCG

174500295 Sesa Goa Ltd. Metal & Mining

175 523598 Shipping Corp. Of India Ltd. Capital Goods

176 500387 Shree Cements Ltd. Capital Goods

177 532498 Shriram City Union Finance Ltd. Finance

178 511218 Shriram Transport Fin Co. Ltd. Finance

179 500550 Siemens Ltd Power

180 523838 Simplex Infrastructure Limited Realty

181 502742 Sintex Industries Ltd. Others

182 500472 SKF India Ltd. Capital Goods

183 501061 State Bank of Bikaner & Jaipur Finance


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184 500112 State Bank of India Finance

185 532200 State Bank of Mysore Finance

186 532191 State Bank of Travancore Finance

187 512531 State Trading Corporation of India Others

188 500113 Steel Authority of India Ltd. Metal & Mining

189 512299 Sterling Biotech Ltd. Healthcare

190 500900 Sterlite Industries Ltd. Metal & Mining

191 524715 Sun Pharmaceutical Inds Ltd. Healthcare

192 500770 Tata Chemicals Ltd. Others

193 500483 Tata Communications Ltd. Consumer Durables

194 501301 Tata Investment Corporation Ltd. Finance

195 500570 Tata Motors Ltd. Auto

196 500400 Tata Power Co. Ltd. Power

197 500470 Tata Steel Ltd. Metal & Mining

198 500800 Tata Tea Ltd. FMCG

199 532755 Tech Mahindra Ltd. IT

200 532299 Television Eighteen India Ltd. Others

201 500411 Thermax Ltd. Capital Goods

202 500413 Thomas Cook (India) Ltd. Others

203 500114 Titan Industries Ltd. Consumer Durables

204 500420 Torrent Pharma Ltd. Others

205 532477 Union Bank of India Finance

206 507878 Unitech Ltd. Realty

207 512070 United Phosphorus Ltd. Others

208 517146 Usha Martin Ltd. Capital Goods

209 532401 Vijaya Bank Finance

210 500575 Voltas Ltd. Others

211507410 Walchandnagar Industries Ltd. Capital Goods

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