Finance Ministry sets minimum annual dividend payout norms for NBFC CPSEs

The guidelines mandate minimum annual dividend payout at 30% of PAT or 4% of net worth, whichever is higher

The Ministry of Finance on Monday brought in central public sector enterprises (CPSEs) classified as non-banking financial companies (NBFCs) under the minimum annual dividend payout norm of 30 per cent of profit after tax (PAT) or 4 per cent of the net worth, whichever is higher.  

 

Issuing the revised guidelines on capital restructuring of CPSEs superseding the earlier guideline issued in 2016, the Department of Investment and Public Asset Management (DIPAM) said a need was felt to holistically review the norms to ensure the policy is aligned to reflect the evolution in the capital market conditions and financial/ capital restructuring of CPSEs.

 

 

The 2016 guidelines don’t mention CPSE NBFCs and pet minimum annual dividend payout at 30 per cent of PAT or 5 per cent of net worth, whichever is higher.

 

The latest guidelines say CPSEs, whose market price of the share is less than the book value consistently for the last six months, and having net-worth of at least Rs 3,000 crore and cash & bank balance of over Rs 1,500 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,” the latest guidelines said.

 

The fresh guidelines further added that, 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 equity share capital.

 

“lf any CPSE seeks an exemption from issuing bonus shares, the proposal will be examined by Committee for Monitoring of Capital Management and Dividend (CMCDC) for advice,” it added. CMCDC will be chaired by the DIPAM secretary with representation from administrative ministries. 

 

The Ministry of Finance further said that the revised guidelines on capital restructuring of CPSE will be duly reviewed not later than three years for aligning the policy with advancements in the Capital Market/regulatory and sectoral changes and for addressing any other concerns of CPSEs.

 

The guidelines also noted that supersession of all guidelines issued earlier splitting of shares will be considered on a 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 a split-off of its shares. Further, there should be a cooling off period of at least three years between two successive share splits,” it added.

 

In the current fiscal year, the government has budgeted to collect Rs 56,260 crore as dividend from public sector enterprises, up from Rs 50,000 crore in 2023-24 fiscal.