‘30% of Net Profit As Dividends…’ Govt’s New Rule For PSUs - Details Here

New Rules For PSUs: The government has issued revised guidelines for capital restructuring of Central Public Sector Enterprises (CPSEs), mandating a minimum annual dividend payout of 30 per cent of profit after tax (PAT) or 4 per cent of net worth, whichever is higher. These changes aim to ensure consistent returns for shareholders while enhancing financial flexibility. 

According to the new framework, notified by the Department of Investment and Public Asset Management (DIPAM) on Monday, financial sector CPSEs, including non-banking financial companies (NBFCs), must also adhere to the 30 per cent PAT minimum, subject to legal provisions.

Key Highlights of the Guidelines

Share Buybacks

CPSEs can initiate share buybacks if their market price remains below book value for six months, provided they have a net worth of at least Rs 3,000 crore and cash reserves exceeding Rs 1,500 crore. This measure is designed to encourage financial restructuring and address undervaluation in the market.

Bonus Share Issuance

CPSEs are encouraged to issue bonus shares if their reserves exceed 20 times the paid-up equity share capital. This provision is expected to reward shareholders and improve market liquidity.

Performance Alignment

CPSEs are urged to prioritise value creation by aligning operations with key performance indicators such as capital expenditure (CAPEX), EBITDA, return on net worth, and asset turnover ratios. The emphasis is on maximising shareholder returns and improving resource efficiency.

Exemptions and Compliance

Exemptions from the guidelines will require DIPAM approval within the same financial year. The guidelines will be reviewed every three years to ensure they remain relevant to market dynamics.

The updated framework underscores the government’s focus on improving CPSE governance, boosting shareholder confidence, and adapting to changing economic conditions.

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(With ANI inputs)