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Informist, Monday, Nov. 18, 2024

 

NEW DELHI – In a bid to enhance the value of public sector enterprises and give them more operational and financial flexibility, the government on Monday issued guidelines for capital restructuring of PSUs, including changes to dividend payment, bonus issues and share buyback policy, the Department of Investment and Public Asset Management said in a release. 

As per the release, all capital management or restructuring of PSUs will be discussed in an inter-ministerial forum called Committee for Monitoring of Capital Management and Dividend by PSUs, which will be chaired by Sisinvestment Secretary Tuhin Kanta Pandey. This 10-member panel will also have a financial adviser from the disinvestment department, representatives from economic affairs and public enterprises departments, a financial adviser and an additional secretary from the PSU's department concerned, an additional secretary from the disinvestment department dealing with the PSU and an economic adviser from the department, and lastly, the chairman and managing director of the PSU concerned and its director finance. 

 

The revised PSU guidelines, effective from 2024-25 (Apr-Mar) itself, will not be applicable to public sector banks, public sector insurance companies and also body corporates which are prohibited from distributing their profits to their members, the release said.

 

As per the guidelines issued, PSUs will have to pay a minimum annual dividend of 30% of the net profit, or 4% of its net worth, whichever is higher. It is also recommended that a staggered dividend regime will enable PSUs to avoid end-loading annual payments, thereby freeing resources during the year-end period. "Payment of dividends at regular intervals helps to revive investor interest and improve market sentiment for CPSE stocks, as regular dividends attract investors to CPSE stocks and retain them in the hope of a future dividend," the department said. 

 

The government last issued CPSE capital restructuring guidelines in May 2016, in which PSUs were to give a dividend of 30% of net profit or 5% of net worth, whichever was higher. "CPSEs may consider paying an interim dividend every quarter after quarterly results or at least twice a year," the department said Monday. 

 

The second guideline is with regard to share buybacks. Under this, PSUs whose market price of the share is less than the book value consistently for the last six months, and have a net worth of over INR 30 billion and cash and bank balance of over INR 15 billion, may consider the option to buy back the shares. Earlier, PSUs with a net worth of INR 20 billion and cash and bank balance of over INR 10 billion could opt for share buybacks. 

 

The guidelines released Monday also said that PSUs may consider the issue of bonus shares when their defined reserves and surplus are equal to more than 20 times of their paid up equity shares capital. Earlier, PSUs could consider issuing bonus shares when the surplus was 10 times its paid up equity share capital.

 

Lastly, the guidelines also mentioned that a listed PSU, when its market price exceeds 150 times its face value consistently for the last six months, may consider splitting off its shares. "Further, there should be a cooling period of at least three years between two successive share splits," the release said. Earlier, PSUs could split off shares when the book value of its share exceeded 50 times its face value. 

 

Tweaks to capital restructuring or management of PSUs will aid boosting investor sentiment, rather than sitting on a cash pile. In FY25 so far, the government has received dividend worth INR 302.26 billion. In FY25, it aims to collect INR 562.60 billion as dividend from PSUs, higher than the INR 500 billion last year.  End

 

Reported by Priyasmita Dutta

Edited by Avishek Dutta

 

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