Hero MotoCorp Limited (“the Company”) is in the business of development, manufacturing, marketing, sale and distribution of two-wheelers and its parts since 1984.The Company’s strategyis to build a robust product portfolio of mobility solutions across categories, explore growth opportunities in both domestic market and globally, aggressively expand reach to customers and ensure customer satisfaction. The Company strives to make positive contribution to society it operates in, through its sustainable and green manufacturing initiatives and its active social responsibility programmes.
With respect to apportioning a share of profit to its shareholders, the Company endeavours to be fair and consistent with its strategy, approach and decision. The management draws the conclusion of distributing dividends after taking into accounta multitude of legal and financial parameters including long-term earning capabilities, growth prospects, opportunity costs, applicable laws and statutory covenants.
Key consideration for the dividend decision are the Company’s historical financial performance, future financial outlook, strategic business needs including expansion plans, acquisitions plans, medium term investments, capital expenditure needs, and dividend payout practice.
The objective of the Dividend Distribution Policy (“the Policy”) of the Company is to define the various factors affecting the dividend decision, i.e.:
Earnings’ stability: The financial performance of the Company has an important bearing on the dividend policy. A stability of earnings builds our confidence in the company andinclines the Company to formulate a more consistent dividend policy than in circumstances or yearsof an uneven flow of income
Liquidity position: Availability of cash and sound financial position is also an important factor in dividend decisions. As dividend means huge cash outflow, the greater the funds and the liquidity of the firm, the better is its ability to pay dividend.
Future Funding Requirements: The Company believes in retaining a part of its profitsforinvesting into business expansion and strengthening the Company’s financial position in the future. A part of income is /may be reserved for investing in capital expenditure, research and development, expanding into new geographical markets or for increased requirements of working capital.
Fluctuations in Business Cycle: Business cycles exercise influence upon dividend Policy. Dividend policy is adjusted according to the business oscillations. In peak seasons of performance (operationally and financially), management creates reserves for contingencies and is pays out higher dividends. Adequate reserves help the Company through tough times / lean season / aggressive competitions and expansion phases, guiding the Company’s decision accordingly.
Regularity and stability in Dividend Payment: The Company believes that dividend payout practice should be stable and consistent over long periods of time, thus creating predictability and visibility of cash flows for the shareholders. In past several years, the Company has been consistently paying high dividend to its shareholders, shall endeavor to follow the same pattern, unless any exceptional circumstances occur.
Contractual Obligations / Debt Repayments, if any: The Company shall take into consideration any contractual obligations / debt principal or interest payments, if and when they occur before distributing dividend to its shareholders.
Legal Requirements: The Policy has been formed in keeping with the current framework / provisions of The Companies Act 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. While taking the dividend decision, any amendments in the same shall be taken into account as and when they occur, with respect to payment and distribution of dividend.
Government Policies: The earning capacity of an enterprise is hugelyimpacted by the changes in monetary, fiscal, industrial, labour, and other government policies. The dividend policy has to be modified or formulated accordingly, if such events occur.
Taxation Policy: Various taxes, including Dividend Distribution Tax, tax on dividend incomeor any other policy or amendments in prevailing rates and conditions can lead to reduction in the earnings of the companies or may affect its investors and accordingly shall be taken into account while taking the dividend decision.
The Company has been amongst the most consistent wealth creators rewarding its shareholders with high dividend payout over the last several years.The Company is debt-free and has a healthy level of reserves, apart of which is retained by the Company to provide for future projects and expansion.
The Company in all its future dividend decisions shall consider the below mentioned financial parameters: