Vedanta Ltd is set to overhaul its dividend policy, moving away from a structure that guarantees a fixed minimum payout to a more flexible, board-driven approach, which may impact the sentiments of investors who have long relied on the company’s predictable returns.
Earlier, the mining giant was committed to paying at least 30% of profits as dividends, and now the board will have the flexibility to pay 30% or the amount they deem fit, chief financial officer Ajay Goel disclosed the move during a post-earnings call with analysts last week.
Speaking on the change, Goel said the company’s dividend framework will transition from a “prescriptive” model to a more “principle-based” one. Vedanta's FY26 dividend payout was the lowest level since FY21.
The timing is significant as Vedanta is in the midst of splitting into five separately listed entities, and the demerged entities will have a similar but separate dividend policy. The company now has the flexibility to pass on dividends received from its subsidiary, Hindustan Zinc, to its own shareholders, Goel told analysts.
Earlier, Vedanta, in its dividend policy document, said that it will pass on “the entire dividend income (net of taxes)” it receives from Hindustan Zinc to its shareholders within six months.
A Vedanta spokesperson, in an email to Mint, has said that the change ‘is not to be read as a reduction in the dividend payout ratio. The spokesperson said that although dividend payouts were lower in FY26, the company highlighted a Total Shareholder Return (TSR) of 93% in FY26 compared with 16% in the previous year as evidence that capital is being deployed effectively. Total shareholder return is the overall return from a stock, including price gains and dividends for Vedanta.
But with the assured minimum gone and five boards now allowed to redirect cash ‘if needed elsewhere in the business’, however, analysts said the investment case for Vedanta as a yield stock has been altered.
A floor is removed
At least one analyst believes that the change introduces a new layer of uncertainty and possible reduction in payouts.
“On dividends, the shift is quite significant. Earlier, the company had a clear commitment to distribute around 30% of profits, which gave investors visibility and made the stock attractive for its yield,” said Suman Kumar, metals and mining analyst at brokerage Philip Capital.
“Now, with the move to a more discretionary policy, that certainty is gone—the board has the flexibility to increase payouts, but also to cut them if cash is needed elsewhere in the business. In effect, what was once a predictable and key part of the investment case becomes less assured going forward,” Philip Capital’s Kumar said.
“Given the demerger and creation of five companies, it is prudent to build more flexibility in the policy framework that enables every company's Board to act in the best interest of its shareholders/investors,” the Vedanta spokesperson said in the email to Mint.
The policy provides more flexibility to the company to decide its capital allocation in the best interest of its shareholders, the spokesperson said.
In FY26, Vedanta’s dividend payout to equity shareholders declined to ₹13,279 crore, from ₹16,772 crore in FY25, and the lowest payout since FY21, when it paid ₹3,519 crore, according to the company’s exchange filings and annual reports.
However, another analyst said this policy was not surprising.
As per the management, post-demerger, each of the five entities will have its own policy; “boards will revert on same,” wrote Ritesh Shah, research analyst at Investec, in a note dated 30 April. “With tapering VRL (parent Vedanta Resources Ltd) maturity, we aren’t surprised on the change in policy,” Shah said in his note.
