Union Finance Ministry has revised norms for dividend payments, share buybacks and stock splits at state-run companies to improve capital management and bolster performance of their equities.
The government has asked state-run non-banking financial companies (NBFCs) to pay a minimum annual dividend of 30 per cent of their profit subject to any present legal provisions, according to guidelines issued by the Department of Investment and Capital Asset Management (DIPAM) on Monday.
Dividend payout limits for NBFCs are prescribed by the Reserve Bank of India (RBI) based on their capital requirement and asset quality.
Power Finance Corp and REC Ltd are the biggest state-run listed NBFCs.
Except for state-run banks and insurance companies, all public sector units (PSUs) have to pay a dividend of 30 per cent of profit or 4 per cent of net worth, whichever is higher.
Presently, PSUs have to pay an annual dividend of 30 per cent of profit or 5 per cent of net worth, whichever is higher.
The new guidelines will be applicable from the current financial year ending March 31, 2025.
Companies whose share price is less than its book value for the past six months, have a net worth of ₹3,000 crore and a cash balance of ₹1,500 crore have been asked to consider share buybacks.
Past limits for share buybacks were a net worth of at least ₹2,000 crore and cash and bank balance of ₹1,000 crore.
The guidelines require state-run firms to issue bonus shares if their reserves are 20 times share capital from five times earlier.
State-run firms have also been asked to opt for stock splits in case the share price exceeds 150 times their face value for the last six months from 50 times earlier. Stock splits help in improving trading volumes, making it attractive for retail investors.
Further, there should be a cooling-off period of at least three years between two successive share splits.
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