Covid-19 impact: Dividend payout by IT firms likely to dip further in FY21

Dividend payout by information technology (IT) services firms in the ongoing financial year is likely to witness a dip as compared to previous years, as companies are aggressively looking at conserving cash to tide over Covid-induced slowdown.

Possible decline in free cash flow because of fall in net profit, additional expenses due to the Covid-19 pandemic, and cash conservation for prospective acquisitions are seen as key factors for this likely scenario.

“Dividend policy will have to undergo a change this financial year. This is mainly because companies are expected to keep cash for acquisitions to generate growth to beat the negative growth that the industry is likely to clock on organic basis,” said V Balakrishnan, chairman of Exfinity Venture Partners, who is also a former CFO and board member at Infosys.