For some firms, the payouts signal confidence in consolidated profitability despite temporary headwinds. For others, they may serve to reassure investors during ongoing restructurings. Either way, the trend raises a key question: are these dividends a genuine vote of confidence, or a potential red flag that warrants closer scrutiny?
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Let’s take a closer look at the balance sheets and business strategies driving these payouts.
Edelweiss Financial Services: From wholesale woes to asset-light growth
First on our list is Edelweiss Financial Services, a diversified financial services company with businesses spanning alternative asset management, mutual funds, asset reconstruction, and life insurance.
The company reported a standalone net loss of ₹51.9 crore in FY25. Despite this, it declared a dividend of ₹1.5 per share, an unusual move given the red ink on its standalone books. However, on a consolidated basis, the company remained in the black with a net profit of ₹536 crore as individual businesses showed significant improvements in their bottom line, with notable growth in asset management and reduction in losses for insurance businesses.
Over the past year, Edelweiss has been actively diversifying its business model, shifting away from wholesale lending through ECL Finance and expanding into retail financial services and asset reconstruction.
This strategic pivot came after the Reserve Bank of India (RBI), in May 2024, barred ECL Finance from undertaking any new structured financing transactions and restricted its operations to winding down existing wholesale exposures. The RBI also prohibited Edelweiss ARC from acquiring fresh bad loans or reorganising existing ones.
The wholesale lending book has since been fully wound down, a difficult but necessary step in the company’s strategic reset. In its place, the company now offers SME and business loans through an asset-light model by partnering with banks.
Going forward, Edelweiss Financial Services plans to grow its business by approximately 20-25% annually over the next 10 years. It also has plans for an initial public offering (IPO) of its alternate asset advisor business – Edelweiss Alternative Asset Advisors (EAAA), with an expected dilution of about 15% (a combination of pre-IPO or IPO). It recently filed the Draft Red Herring Prospectus with the Securities and Exchange Board of India.
On the financial front, the company has demonstrated a resilient performance over the last five years. Profit has grown at a CAGR of 17%, despite periods of strategic restructuring and business realignment. That said, its sales growth lags, unlike some peers who are posting double-digit gains.
Shares of Edelweiss are up 52% over the last year driven by robust financial performance and improving business prospects. The rally gained further momentum after the RBI lifted restrictions on its companies.
As a result, the stock is now trading at a price-to-book value (P/BV) of 2.3x, well above the industry average of 1.4x. This premium valuation reflects market optimism around the company’s turnaround efforts. However, it also implies that future earnings growth and execution will need to justify the elevated multiple.
Aditya Birla Real Estate: Divestment fuels future real estate ambitions
Next on our list is Aditya Birla Real Estate (ABREL), the real estate arm of the Aditya Birla Group.
The company reported a standalone net loss of ₹24 crore for FY25, primarily due to a significant decline in revenue and one-time expenses related to the sale of its paper and textile businesses. On a consolidated basis as well, the company reported a net loss of ₹157 crore. Despite this, the board of directors of the company announced a dividend of ₹2 per share.
ABREL recently announced the sale of its pulp and paper business, which accounted for nearly 80% of its revenue, to ITC for ₹3,498 crore. The deal, expected to be completed by Q2FY26, will help clean up the company’s balance sheet. Post-sale, the company plans to repay around ₹2,000 crore of debt linked to the paper business. As of now, its consolidated debt stands at ₹3,575 crore, with a debt-to-equity ratio of 0.92x.
The cash from the deal is also expected to give ABREL a competitive edge, enabling it to partner with landowners through joint ventures and take on new, selective debt to grow its portfolio.
Financially, the company has reported a decline in its sales growth over the past five years. Its return ratios are also negative. However, with the divestment of its paper business, this is expected to improve. The company aims to achieve over ₹15,000 crore in annual pre-sales in the next few years, almost double its current booking value in about three years.
For FY26, the company plans to launch around ₹14,000 crore of new projects. These launches are largely skewed towards Q3 and Q4, with a couple possibly in Q2. This new launch value, combined with existing sustenance inventory of approximately ₹6,700 crore, means projects worth around ₹20,000 crore will be available for sale in the next 12 months. The company also plans to hit a gross development value (GDV) of ₹1 trillion over the next year.
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Shares of ABREL are down 9% over the last year. Still, the stock is trading at a price-to-book value (PBV) of 7.15x, above the industry average (real estate) of 3.2x. The premium reflects investor expectations of a stronger, more focused ABREL post-divestment, though it also raises the bar on execution.
SH Kelkar & Company: Navigating fire recovery with fragrance growth
Third on our list is SH Kelkar & Co., the largest domestic fragrance producer in India and the only company of Indian origin to file patents in the field of fragrance and novel aroma molecules.
FY25 saw SH Kelkar report a standalone net loss of ₹14 crore as additional operating costs due to the fire at its Vashivali factory weighed on the company’s operating efficiency. However, on a consolidated basis, the company reported a net profit of ₹73 crore as total revenue grew 10% YoY on account of sustained demand across all segments and healthy traction in the domestic market. As a result, the company announced a dividend of ₹1 per share. This is in line with its dividend policy.
SH Kelkar has delivered steady growth, with consolidated revenue rising at a CAGR of 14% and net profit at 13% over the past five years. The management remains confident of sustaining a growth rate above 12% in the medium term and expects to meet this target in FY26, supported by a strong order pipeline and positive market momentum.
However, operating profit margins (OPM) have been volatile, ranging between 13% and 16% in recent years. After touching a high of 18% in FY21, margins dropped to 13% in FY23 before recovering to 15% in FY25. The company is now targeting long-term OPM expansion to 18-20% by FY27, aided by improved raw material availability and the gradual impact of price hikes averaging 3-3.5% across its product segments.
On the operational front, SH Kelkar is progressing with the re-establishment of its Vashivali fragrance facility, which was impacted by a fire. The plant is expected to be commissioned within FY26, with reconstruction backed by insurance. The company has already received an interim settlement of ₹95 crores, while the remaining claim is under process.
Financially, SH Kelkar remains comfortably positioned, with a debt of ₹658 crores translating into a debt-to-equity ratio of 0.44x and an interest coverage ratio of 3.82x.
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Shares of SH Kelkar have gained over 17% in the past year, reflecting improved investor sentiment on the back of steady growth and margin recovery. As a result, the stock is currently trading at a price-to-earnings (P/E) ratio of 30.8x, which is well above its 10-year average of 24.4x.
Manali Petrochemicals: Global headwinds and strategic shifts
Last on our list is Manali Petrochemicals. The company is the only domestic manufacturer of Propylene Glycol. It is also the first and largest Indian manufacturer of Propylene Oxide.
For FY25, Manali Petrochemicals reported a standalone net loss of ₹9 crore, weighed down by continued global headwinds. Despite the dip in profitability, the company declared a dividend of ₹0.5 per share, signalling confidence in its long-term outlook.
On a consolidated basis, however, the company posted a net profit of ₹29 crore, up from ₹19 crore in FY24, driven by improved operational efficiency and better performance from subsidiaries.
Strategic initiatives such as cost optimization, a shift toward premium products, and a sharper focus on international markets helped mitigate margin pressures amid a decline in revenue. Profitability also improved sequentially, on a consolidated basis, with the company turning profitable in the second half of the year.
While the recovery is still nascent, Manali Petrochemicals’ financial performance over the past five years has been marked by volatility. Revenue has grown at a modest CAGR of 2.2% while net profit has declined at a negative CAGR of 9% due to persistent demand softness, pricing pressure, and global supply chain challenges.
Operating margins have also eroded significantly, sliding from 32% in FY22 to just 5-6% in FY24 and FY25. Return ratios have also seen a sharp correction with RoE and RoCE dropping steadily after FY22, landing at 2.92% and 4.83% in FY25.
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The stock of Manali Petrochemical has fallen 20% over the last year. However, over the last six months, shares of the company are up 11%.
On the valuation front, the stock appears relatively inexpensive, trading at a price-to-book value (PBV) of 1.11x, below the industry average of 2.16x, indicating potential undervaluation, especially if the company can sustain or improve its recent profitability at the consolidated level.
Beyond the payout: Decoding investor signals
The recent trend of companies issuing dividends despite standalone losses undeniably marks a strategic shift in how they signal financial resilience and future prospects. This move often hinges on the strength of their consolidated financial performance, the successful execution of ambitious strategic realignments, or a firm belief in an impending turnaround.
However, for the discerning investor, these “red-ink dividends” demand meticulous scrutiny. While they can indeed be a vote of confidence from management, they can also mask underlying vulnerabilities or over-optimistic projections.
For more such analyses, read Profit Pulse.
It is paramount to look beyond the immediate payout and delve into the consolidated financials, debt structures, growth strategies, and the broader industry landscape. A dividend today, no matter how generous, carries little value if it’s not underpinned by sustainable, long-term financial health and robust execution.
About the author: Ayesha Shetty is a research analyst registered with the Securities and Exchange Board of India. She is a certified Financial Risk Manager (FRM) and is working toward the Chartered Financial Analyst (CFA) designation.
Disclosure:The author does not hold shares in any of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult a financial professional before making investment decisions.