Govt revises capital restructuring norms on share buybacks, dividends for CPSEs

Financial sector CPSES like NBFCs may pay minimum annual dividend of 30% of PAT subject to the limit, the government said

The Union government modified some provisions of existing guidelines on capital restructuring of central public sector enterprises (CPSEs), including those on share buybacks and dividends, with an aim to align them with capital market conditions and financial capital restructuring of the CPSEs.

Financial sector CPSES like non-banking financial companies (NBFCs) will now pay a minimum annual dividend of 30 percent of their profit after tax (PAT), subject to the limit, if any, under any extant legal provisions.

However, for every other CPSE, the minimum annual dividend has been mandated at 30 percent of net profit or 4 percent of the net-worth, whichever is higher subject to the limit, if any, under any extant legal provision.

The guidelines will be applicable from the current financial year 2024-25.

According to the previous guideline, issued in 2016, the dividend payment requirement was 30 percent of their profit or 5 percent of net worth, whichever is higher. And, there was no separate carve out for financial sector CPSEs such as NBFCs.

As per the fresh guidelines, the government has recommended share buybacks for state-run entities, whose market price of the share is less than the book value for the last six months consistently, have a net-worth of atleast Rs 3,000 crore, and a bank balance of over Rs 1,500 crore.

It has also asked every CPSE to consider issuing bonus shares when their defined reserves and surplus are equal to or more than 20 times of its paid-up equity share capital.

The government has asked a listed CPSE whose market price exceeds 150 times of its face value consistently for the last six months to consider a split-off its shares.

"Further, there should be a cooling off period of at least three years between two successive share splits," according to the new guidelines.

These guidelines will be reviewed within three years to further align the policy with advancements in the Capital Market as well as to address any regulatory and sectoral changes pertaining to CPSEs.