NEW DELHI: The Centre on Monday unveiled revised guidelines for state-run firms linked to dividend payment, buyback of shares, issue of bonus shares and splitting of shares and the measures are aimed at creating value in PSUs to maximise returns for govt and other shareholders.
The Department of Investment and Public Asset Management (DIPAM) released the revised guidelines, amending its earlier 2016 rules, to better reflect market realities. The objectives of the revised guidelines include enhancing value of the CPSE and total returns for the shareholders, improving performance and efficiency of these entities by providing them more operational and financial flexibility. These are also aimed at enabling CPSEs to play an effective role in economic growth of the country and ensure more investors participate in the value creation by CPSEs.
“These guidelines have been done keeping in mind the realities of the market and are forward looking. They will also help PSUs to push capex and provide them flexibility,” said Tuhin Kanta Pandey, secretary DIPAM.
Under the revised guidelines every CPSE would pay a minimum annual dividend of 30% of profit after tax (PAT) or 4% of the networth, whichever is higher subject to the limit, if any, under any extant legal provision. Earlier the limit was 5% of net worth. Financial sector CPSES like NBFCs may pay a minimum annual dividend of 30% of PAT subject to the limit.
The new guidelines say that unlisted CPSES may pay a dividend once in a year as final dividend based on previous year audited financials.
The guidelines says that CPSEs, whose market price of the share is less than the book value consistently for the last six months, and having net-worth of atleast Rs. 3000 crore and cash and bank balance of over Rs. 1500 crore may consider the option to buy-back their shares.
Under the new guidelines, every CPSE may consider the issue of bonus shares when their defined reserves and surplus are equal to or more than 20 times of its paid-up equity share capital.
With regard to splitting of shares, the revised guidelines stipulate a listed CPSE where market price exceeds 150 times of its face value consistently for the last six months may consider a split-off of its shares. There should be a cooling off period of at least three years between two successive share splits.
These guidelines don’t apply to PSBs, insurance companies and also to any entity which is prohibited from distribution of profits and companies set up under section 8 of the Companies Act, 2013.