Finance Ministry Revises CPSE Dividend Payment Guidelines

The finance ministry on Monday revised its 2016 guidelines with regard to dividend payment by Central Public Sector Enterprises. The move follows CPSEs’ strong balance sheet and improved market capitalisation over the past few years.

As per the revised guidelines issued by the Department of Investment and Public Asset Management, every CPSE would pay a minimum annual dividend of 30% of PAT or 4% of the net worth, whichever is higher.

Financial sector CPSEs like NBFCs may pay a minimum annual dividend of 30% of profit, subject to the limit. The revised guidelines shall be effective from the current financial year 2024-25.

Dipam emphasised that all issues regarding capital management/restructuring of CPSEs will be discussed in the inter-ministerial forum called the Committee for Monitoring of Capital Management and Dividend by CPSEs, chaired by Secretary Dipam.

The finance ministry had, in May 2016, issued comprehensive guidelines on 'Capital Restructuring of CPSEs in 2016 for efficient management of government investment in CPSEs.

As per the existing guidelines, CPSE is required to pay a minimum annual dividend of 30% of profit or 5% of the net worth. Also, every CPSE having a net worth of at least Rs 2,000 crore and cash and bank balance of over Rs 1,000 crore was required to opt for share buyback.

Also, bonus shares are to be issued if the defined reserves and surplus of CPSEs are equal to or more than 10 times their paid-up equity share capital.

Notably, the combined market capitalisation of CPSEs, banks, and insurance companies has grown over 500% in the past three years.

In the ongoing financial year, the government projected to collect Rs 56,260 crore as a dividend from public sector enterprises.