Government Strengthens CPSE Dividend Policy to Enhance Shareholder Returns

The government has mandated that Central Public Sector Enterprises (CPSEs) distribute a minimum annual dividend of 30% of their profit after tax or 4% of their net worth. New guidelines aim to ensure consistent returns, streamline financial operations, and include provisions for share buybacks and bonus shares issuance.

The government has taken decisive steps to bolster shareholder returns by mandating that Central Public Sector Enterprises (CPSEs) provide a minimum annual dividend of 30% of their profit after tax (PAT) or 4% of their net worth. This applies to all CPSEs, including financial entities like NBFCs, ensuring a steady stream of returns for investors.

The new framework, unveiled by the Department of Investment and Public Asset Management (DIPAM), introduces key directives concerning dividends, share buybacks, and bonus shares issuance. Of significant note is that CPSEs can initiate share repurchases if their market valuation dips below the book value for six consecutive months, provided they meet specific financial thresholds.

In a bid to encourage value creation, the updated guidelines mandate CPSEs to align their operations with vital performance metrics such as capital expenditure, EBITDA, and return on net worth. This strategic alignment is designed to optimize resource use and amplify shareholder returns while accommodating evolving market conditions.

(With inputs from agencies.)