The Centre has tweaked the capital management guidelines, giving the central public sector enterprises (CPSEs) more operational and financial flexibility by relaxing the criteria for payment of dividends, share buyback, issue of bonus shares and splitting of shares.
According to revised guidelines, every CPSE will pay a minimum annual dividend of 30% of its profit after tax (PAT) or 4% of the net worth, whichever is higher. Earlier norms mandated CPSEs to pay a minimum annual dividend of 30% of the PAT or 5% of the net worth, whichever was higher. Dividends are a major source of non-tax revenues for the Centre.
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The guidelines would apply to all CPSEs and their subsidiaries from the current financial year. It would not be applicable to public sector banks and insurance companies.
On buyback, the new guidelines said CPSEs may consider the option to buy back shares if market price of the share consistently remained less than the book value for the last six months, have a net worth of at least Rs 3,000 crore and cash and bank balance of more than Rs 1,500 crore. The previous norms mandated that CPSEs having a net worth of at least Rs 2,000 crore and a cash and bank balance of over Rs 1,000 crore to exercise the buyback option.
The revised guidelines said every CPSE may consider the issue of bonus shares when their defined reserves and surplus are equal to or more than 20 times its paid-up equity share capital. As per earlier guidelines, CPSEs were required to issue bonus shares if their reserves and surplus were equal to or more than 10 times their paid-up capital.
The Department of Investment and Public Asset Management (DIPAM) on Monday issued the revised guidelines which would supersede the comprehensive guidelines issued in 2016, keeping pace with the rapid growth of the CPSEs and feedback from stakeholders.
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On splitting of shares, the new norms said a listed CPSE whose market price exceeds 150 times its face value consistently for the last six months may consider the option. Further, there should be a cooling-off period of at least three years between two successive share splits. The earlier norms required every CPSE whose market price or book value of its share exceeded 50 times its face value to split shares to make them affordable for retail investors.
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