Govt revises dividend, buyback and bonus issue norms for CPSEs

The Union government has revised its guidelines regarding capital restructuring of Central Public Sector Enterprises (CPSEs) to address the critical interlinked issues such as leveraging of assets lor fresh investment, capital restructuring, financial restructuring and such other matters.

The guidelines stipulate eligibility conditions for CPSEs for payment of dividend, buyback of shares, issue of bonus shares and splitting of shares.

Under the revised norms, the government said that every CPSE would now have to pay a minimum annual dividend of 30% of PAT or 4% of the net worth, whichever is higher. Financial sector CPSES like NBFCs may pay a minimum annual dividend of 30% of PAT.

For buybacks, the state-run companies GPSE, whose market price of the share is less than the book value consistently for the last six months, and having networth of at least Rs 3000 crore and cash and bank balance of over Rs 1,500 crore may consider the option to buyback their shares.

The guidelines noted that cash and bank balances of some CPSEs may be high due to receipt of advance and milestone payments. Therefore, cash and bank balances for the purpose of buyback, will mean own cash i.e. cash holdings minus the advances received from clients for the project work.

For assessing the net worth of a CPSE, general reserves and surplus plus paid-up share capital of the CPSEs are required to be used.Meanwhile, these public companies 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.For stock splits, listed CPSEs where market price exceeds 150 times of its face value consistently for the last six months may consider a split-off of its shares.

“Further, there should be a cooling off period of at least three years between two successive share splits,” a notification by DIPAM said.