NEW DELHI: In a major change in capital restructuring guidelines for non-bank public sector entities, the government has mandated listed Central Public Sector Enterprises (CPSEs) to consider splitting their shares if they trade above 150 times the face value for six months.
As per earlier rules, listed CPSEs had to consider a stock split if the stocks traded above 50 times the face value. The new rules mandate PSUs to pay dividends at least 30% of net profit or 4% of the net worth, whichever is higher. As per the guidelines, a listed PSU, where the market price exceeds 150 times its face value consistently for the last six months may consider splitting off its shares. There should be a cooling-off period of at least three years between two successive share splits.
As for rules regarding dividend payouts, the guidelines say CPSEs should strive to pay a higher dividend (than mandated 30%) taking into account relevant factors like profitability, capex requirements with due leveraging, cash reserves and net worth. The government has advised these companies to maintain a staggered dividend regime to avoid end-loading of annual payments.
“Payment of dividend at regular intervals helps revive investor interest and improve market sentiment for CPSE stocks, as regular dividend attracts investors to CPSE stocks and retain them in the hope of a future dividend,” says the guidelines.
The guidelines advise these companies to consider a buyback if their shares are priced less than book value consistently for the last six months and they have net worth of Rs 3,000 crore and company stocks and a net worth of Rs 3000 crore and cash & bank balance of over Rs 1,500 crore may consider the option to buy-back their shares. The government wants CPSEs to consider bonus share issues when their defined reserves and surplus are equal to or over 20 times its paid-up equity share capital.