InvestorQ : Is it true that IT and software companies in India like Infosys, HCL Tech, TCS and Wipro could become more conservative on dividend payouts?
Arya Nanda made post

Is it true that IT and software companies in India like Infosys, HCL Tech, TCS and Wipro could become more conservative on dividend payouts?

Answer
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Deepa Salunkhe answered.
4 months ago


This trend was already visible in FY20 and could become a lot more pronounced in FY21. Due to COVID-19 syndrome, Indian IT companies are gradually becoming more economical in payment of dividends. IT companies are cash rich and in the past they have been liberal with dividend payouts and also with buyback of shares to reward shareholders. In FY20, the dividend payout of all IT firms was lower other than TCS. Going ahead, it is expected to be still lower in FY21 as IT companies conserve cash rather than paying it back to shareholders. Gartner has estimated a 7% contraction in global IT spending and that could impel IT companies to cut down on their cash burn. Buybacks may also be ruled out for now. Most IT companies may be looking to use cash for strategic acquisitions to buy growth in a tough market; which is a good sign. In fact, lower dividend payout is normally in sync with better valuations, but that only time will tell.