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Dividend receipts from PSUs are a significant non-tax revenue source for the Government, of which O&G PSUs contribute as much as ~33% of the FY25 target of Rs562.6bn. So far, O&G PSUs have helped garner Rs143.9bn, and we reckon their total contribution would touch Rs214.3bn, which would take the overall receipt tally beyond Rs650bn. Key contributors include ONGC (Rs88.9bn), IOCL (Rs51bn), and BPCL (Rs36.8bn), with high payout ratios; of ~35%, ~63%, and ~44% respectively. BPCL (5.8%) and IOCL (5.5%) lead the dividend yields, underscoring the vital fiscal role of O&G PSUs in bridging deficits ahead of the Budget

O&G PSUs: Key contributors to Government’s Dividend Receipts

As the Union Budget Day draws closer, the government’s fiscal management and revenue mobilization strategies take center stage. Dividend receipts from Public Sector Undertakings (PSUs) are a crucial component of the government’s non-tax revenue, offering a predictable and substantial inflow to bridge fiscal deficits. For FY25, mounting expectations of fiscal prudence and capital expenditure have made the role of oil PSUs in dividend contributions even more pivotal.

The Power, Coal, and Petroleum & Natural Gas sectors together contribute around 65- 70% of the total dividend receipts and hence play a strategic role in strengthening the economy. The total dividend receipts for FY25 are targeted to reach Rs 562.6bn. The bulk of the target has already been met, and only Rs 78.8bn is yet to be received.

The Ministry of Petroleum and Natural Gas, which oversees some of the most profitable PSUs, is the cornerstone of the government’s dividend strategy as it contributes a whopping ~33%. At this juncture, it is pertinent to analyse dividend trends to get absolute clarity on the government’s fiscal preparedness and plans of funding developmental priorities. In FY24, the dividend received from O&G PSUs stood at Rs 193.5bn, which for the current year FY25 is Rs 143.9bn till date. The O&G PSUs are among the high dividend paying companies. ONGC has an average payout of ~36%, Oil India ~34%, GAIL ~46%, IOCL ~40%, and BPCL above 60%, all on standalone earnings

As per our analysis, the FY25 dividend receipts could reach ~Rs 650bn, which will surpass the current target of Rs 562.6bn. Our estimate of O&G PSUs is ~Rs214.3bn which includes additional receipts of Rs 70.4bn for the remaining year.

We expect ONGC to contribute the highest (41%) among the O&G PSUs at Rs 88.9bn, of which ~Rs 63bn (Rs 8.5/shr) has already been received. This has fuelled expectations of a Rs 3.5 DPS in H2FY25 (considering a 34.5% dividend payout based on Bloomberg consensus standalone earnings). IOCL comes next in our estimate at ~Rs 51bn (24%) which has already been met (Rs 7/shr) and we expect no further dividend for the year (considering a 58.4% dividend payout based on Bloomberg consensus standalone earnings). We foresee BPCL at third position with Rs 36.8bn (17%) of which Rs 24.1bn has been received, implying a DPS of Rs 5.5 in H2FY25 (considering a 63.3% dividend payout based on Bloomberg consensus standalone earnings). GAIL has not declared any dividend so far, and a dividend of Rs 23.9bn (11%) with DPS of Rs 7 is expected in its case (considering a 43.7% dividend payout based on Bloomberg consensus standalone earnings). Finally, dividend receipts of Oil India are expected to reach Rs 13.8bn (7%) which indicates a DPS of Rs 9.5 in H2FY25 (considering a 34% dividend payout based on Bloomberg consensus standalone earnings.)

Talking of Oil PSU Dividend yields on CMP, it is expected to be 3.8% for GAIL as it has yet not provided any, followed by 2% for BPCL and Oil India, and 1.3% for ONGC. The annual yield could be highest for BPCL 5.8%, IOCL 5.5% followed by ONGC 4.5%, GAIL 3.8% and Oil India at 3.2%.

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