Govt working on CPSEs’ capital restructuring

New Delhi: The central government is working to amend its 2016 guidelines with regard to dividend payment, bonus issues and share buyback by CPSEs, officials said. The Finance Ministry had in May 2016, issued a comprehensive guidelines on ‘Capital Restructuring of Central Public-Sector Enterprises (CPSEs)’ in 2016 for efficient management of government investment in CPSEs. “With the CPSEs now more-strong in terms of balance sheet and having improved on their market capitalization (mcap), it is now time for a relook of the capital restructuring guidelines,” an official told. The amended guidelines are expected to be issued by the finance ministry this month, another official said.

As per the capital restructuring guidelines issued, CPSEs that do not have plans to deploy their capital optimally for business purposes should have a professional look at the surplus funds available to them. As per the guidelines issued by the Department of Investment and Public Asset Management (DIPAM) in May 2016, every CPSE is required to pay a minimum annual dividend of 30 per cent of PAT or 5 per cent of the net worth, Also, every CPSE having net worth of at least Rs2,000 crore and cash and bank balance of over Rs1,000 crore were required to opt for share buyback.

Also, bonus shares are to be issued if the defined reserves and surplus of CPSEs is equal to or more than 10 times of its paid-up equity share capital. A CPSE where market price or book value of its share exceeds 50 times of its face value will split off its shares appropriately. The intention behind the guidelines is that CPSEs sitting on cash piles are required to pay dividends, which will, in turn, help keep investors interested in the stock.

The combined market capitalisation (mcap) of CPSEs, banks and insurance companies has grown over 500 per cent in the past three years from Rs15 lakh crore to over Rs58 lakh crore.