DIPAM may issue fresh norms for PSU buybacks

The newly-named Department of Investment and Public Asset Management (DIPAM) is likely to issue fresh guidelines this year for dividends, buybacks, bonuses and restructuring of state-owned companies after a notification issued by the government gave it wide-ranging responsibilities.

After a change in the rules of business posted by the Cabinet Secretariat last week, DIPAM (the erstwhile disinvestment department) will now be responsible for issuing guidelines to Central Public Sector Enterprises (CPSEs) and providing them direction regarding dividends, buybacks, restructuring and even mergers and acquisitions.

This is apart from the sale of minority stakes of these CPSEs and playing a major part in the Narendra Modi government's ambitious strategic disinvestment plans. The department will now also be responsible for handling the government's investments in Axis Bank, Larsen & Toubro and ITC through Specified Undertaking of Unit Trust of India (SUUTI). So far, notifications and guidelines for CPSEs have been issued by various central government departments including the Department of Public Enterprises and the expenditure and economic affairs departments of the finance ministry.

"There is a need to rationalise the various guidelines which are issued from all across the government. Work now begins to rationalise all these guidelines and get them under a common platform," said a senior government official.

"DIPAM, with all other stakeholder departments, will now review all the guidelines related to bonuses, dividends, share buybacks and restructuring with regards to public sector undertakings (PSUs) and fresh guidelines may be issued soon," said another official.

Both the officials said work on the matter has just begun and hence no decision has been finalised regarding PSUs and the way the government manages its investments.

The overhauling of the disinvestment department to DIPAM is in line with the announcement made by Finance Minister Arun Jaitley in his Union Budget 2016-17 speech on February 29. The decision is aimed at proper management of the Centre's investments in equity including its disinvestment in central PSUs.

According to the notification dated April 19, the new department has been mandated to "advise the government in the matters of financial restructuring of central public sector enterprises and for attracting investment through capital markets".

DIPAM will continue working under the finance ministry and it will deal with "all matters relating to management of central government investments in equity including disinvestment of equity in central public sector undertakings".

It will also deal with "all matters relating to sale of central government equity through offer for sale or private placement or any other mode in the erstwhile central public sector undertakings", the notification reads.

All other post-disinvestment matters, including those relating to and arising out of the exercise of call option by the strategic partner in the erstwhile central public sector undertakings, shall continue to be handled by the administrative ministry or department concerned, where necessary, in consultation with the DIPAM, it says.

NEW ROLE

• The overhauling of disinvestment department to DIPAM is in line with the announcement made by Finance Minister Arun Jaitley in his Union Budget 2016-17
  

 

DIPAM will continue working under the Finance Ministry and it will deal with all matters relating to the management of central government investments in equity
 

It will also deal with all matters related to sale of central government equity through offer for sale or private placement or any other mode in the erstwhile central public sector undertakings