NEW DELHI: The Finance Ministry has issued revised capital restructuring guidelines for Central Public Sector Enterprises (CPSEs), mandating annual dividend payments of at least 30 per cent of net profit or 4 per cent of net worth, whichever is higher.
These guidelines, issued by the Department of Investment and Capital Asset Management (DIPAM), include updated provisions for financial CPSEs like NBFCs, which must meet these dividend standards but may adhere to additional legal limits.
This revision, updating the 2016 rule of 5 per cent of net worth or 30 per cent of profit after tax, introduces changes specific to market performance. For instance, CPSEs with stock prices consistently below book value over the last six months, a net worth above Rs3,000 crore, and cash reserves exceeding Rs1,500 crore are now encouraged to consider share buybacks.
Bonus and share split
Further, CPSEs with significant reserves – 20 times or more of their paid-up equity – are advised to issue bonus shares. Additionally, listed CPSEs with share prices consistently 150 times their face value over six months may consider stock splits, with a three-year interval required between splits.
Subsidiaries of CPSEs, where the parent entity holds more than a 51 per cent stake, will also follow these guidelines. However, public sector banks, insurance companies, and Section 8 companies under the Companies Act are exempt.
A Committee for Monitoring of Capital Management and Dividend by CPSEs (CMCDC), chaired by the DIPAM Secretary, will review capital management issues across CPSEs. The guidelines mandate interim dividends for listed CPSEs to cover at least 90 per cent of projected annual dividends, with final dividends to be distributed promptly after AGMs.
Unlisted CPSEs may pay one final dividend annually based on audited financials. These measures aim to boost CPSE performance, enhance shareholder value, and provide financial flexibility for operational improvements.
