Oil and gas sector leads profit pool, says Motilal Oswal report

Oil & Gas | Representational image

The oil and gas sector has emerged as one of the largest contributor to the overall profit or dividend pool, said Motilal Oswal Financial Services in a report.

According to MOFSL report 'Payouts', the oil and gas sector was the largest contributor to the overall profit pool of about 22 per cent, while technology was the largest payout contributor to the overall payout pool at 20 per cent over FY10-20.

The report provides a detailed analysis into one of the key alternatives to capital allocation - 'Payout to shareholders' - to understand its importance in shareholders' value creation.

"Over FY10-20, 186 companies under MOFSL universe have delivered an average payout ratio of 41 per cent with shareholder CAGR return of 8 per cent."

"MOFSL analysed these companies to understand the impact of payouts ratios in creating shareholder value over the last decade."

As per the top-six sectors that contributed high payout ratios are "Mining (75 per cent), Consumer (70 per cent), Technology (58 per cent), Utilities (50 per cent), Media (41 per cent) and Capital goods (40 per cent)".

"Divergence in profit pool and payout pool of companies is primarily due to varying level of capital intensity across different sectors."

"MOFSL analysis suggest that Consumer and Technology sector have lowest capital intensity."

Accordingly, the analysis of companies under the MOFSL universe over FY10-20 suggests that 'Consumer and Technology' sectors have generated an overall shareholder return of 19 per cent and 13 per cent CAGR.

"This is much higher than the overall shareholder return for the MOFSL universe at 8 per cent CAGR.

"Further, over FY16-20, more (including a few new) sectors are coming into the limelight - Capital Markets, Consumer, Diagnostics, Insurance, Internet, Mining and Utilities - and are showing signs of the 'Winning Troika'."



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