Exciting Changes Ahead: Govt to Transform CPSE Capital Guidelines for Better Dividend Payouts | Market News
The government is set to revise its 2016 guidelines on dividend payments, bonus issues, and share buybacks by Central Public Sector Enterprises (CPSEs), according to officials. These amendments, expected to be issued by the finance ministry this month, aim to optimize the management of government investments in CPSEs, which have shown significant improvements in their balance sheets and market capitalizations.
Originally issued in May 2016, the guidelines mandated CPSEs without optimal capital deployment plans to professionally manage surplus funds. Key stipulations included paying a minimum annual dividend of 30% of Profit After Tax (PAT) or 5% of net worth, and compulsory share buybacks for CPSEs with a net worth over Rs 2,000 crore and cash reserves exceeding Rs 1,000 crore. Additionally, it required issuing bonus shares when reserves equal ten times the paid-up equity share capital and splitting shares when market prices exceed 50 times their face value.
These measures intend to maintain investor interest by ensuring that CPSEs with significant cash reserves distribute dividends. The market capitalization of CPSEs, banks, and insurance companies has soared by over 500% in three years, from Rs 15 lakh crore to more than Rs 58 lakh crore. Simultaneously, the government’s equity holding has quadrupled to Rs 38 lakh crore from Rs 9.5 lakh crore since January 2021.
In the fiscal year 2024-25, CPSEs have contributed Rs 10,604.74 crore in dividends, while the government has budgeted to collect Rs 56,260 crore in dividends from public sector enterprises, up from Rs 50,000 crore in the previous year. The updated guidelines aim to align with the enhanced financial robustness of CPSEs and ensure efficient capital allocation.
First Published: Sep 01, 2024 | 11:37 PM IST
Original Story https://www.business-standard.com/markets/news/govt-to-amend-cpse-capital-restructuring-guidelines-for-dividend-payment-124090100256_1.html
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