The guidelines lay down eligibility conditions for payment of dividend, share buyback, issue of bonus shares and share split for CPSEs.
Under the revised norms, the government said every CPSE will now have to pay a minimum annual dividend of 30% of PAT or 4% of net worth, whichever is higher. Financial sector CPSES like NBFCs can pay a minimum annual dividend of 30% of PAT.
For buybacks, state-run companies GPSE, whose market value has been consistently below book value for the last six months, and at least Rs. 3000 crore net worth and Rs. Has a cash and bank balance of over 1,500 crores. Option to buyback their shares.
The guidelines noted that cash and bank balances of some CPSEs may be high due to receipt of advances and milestone payments. Therefore, cash and bank balance for the purpose of buyback means own cash i.e. cash holdings minus advances received from clients for project work.
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To assess the net worth of a CPSE, it is necessary to use the general reserves and surplus plus the paid-up share capital of the CPSE.
Meanwhile, these public companies can consider the issue of bonus shares when their defined reserves and surplus are 20 times or more of its paid-up equity share capital.
For stock splits, a listed CPSE where the market price for the last six months is more than 150 times its face value can consider its share split.
“Furthermore, there should be a cooling off period of at least three years between two successive share splits,” said a notification by DIPAM.
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