Finance Ministry has come out with revised guidelines regarding capital restructuring of Central Public Sector Enterprises (CPSEs). These “include norms related with dividend payout, split of shares, buyback, and issuance or bonus of shares beside others.
It has been said that every CPSE would pay minimum annual dividend of 30% of PAT or 4 per cent of the networth, whichever is higher subject to the limit, if any, under any extant legal provision. Financial sector CPSES like NBFCs may pay minimum annual dividend of 30per cent of PAT subject to the limit, if any, under any extant legal provisions.
“The minimum dividend as indicated above is only a minimum benchmark. CPSEs are advised to strive paying higher dividend taking into account relevant factors such as profitability, capex requirements with due leveraging, cash reserves and net worth”, guidelines said.
Buyback
GPSE, whose market price of the share is less than the book value consistently for the last six months, and having net-worth of atleast ₹3000 crore and cash & bank balance of over ₹1500 crore may consider the option to buy-back their shares. lt is clarified 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, shall mean own cash i.e. cash holdings minus the advances received from clients for project work. For assessing the net worth of a CPSE, general Reserves and Surplus plus paid-up share capital of the CPSE are required to be used.
Bonus Share
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 capital.
Stock Split
The Board of the CPSEs needs to discuss and decide on the desirability of splitting the share. ln supersession of all guidelines issued earlier splitting of shares will be considered on case to case basis. However, a listed CPSE where market price exceeds 150 times of its face value consistently for the last six months may consider split-off its shares. Further, there should be a cooling off period of at least three years between two successive share split.