Centre frames guidelines on corporate actions for PSUs

In an effort to enhance its return on equity for its investments in the public sector undertakings (PSUs) centre will now frame guidelines on crucial areas of capital restructuring to spur economic growth. 

The guidelines will be applicable to all the cash rich profit making PSUs. Centre will not only be providing  guidelines on the minimum dividend payouts to be maintained by the PSUs but also will be laying down certain specific conditions under which the PSUs will have to issue bonus shares and announce buy back of shares. The PSUs will now have to fork out at least 30 percent of their net profit or 5 per cent of their net-worth, whichever is higher as annual dividend to the centre. These norms will be applicable for 157 profitable PSUs. 

The guidelines will be issued by the Department of Investment and Public Asset Management aiming at addressing the resource management issues of PSUs. Centre appointed nominee director and nodal ministries will take active role in investment decisions of these PSUs and ensure efficient allocation of government funds  for growth and economic development. PSUs with defined reserves and surplus of over 5 times the paid up capital will be issuing bonus shares as per the new guidelines. Various corporate actions like splitting of shares to make it attractive for retail investors will take place for PSU stocks.

Companies with a book value at 50 times its face value will be a sure candidate for splitting of shares even as the companies with a net-worth of Rs. 2,000 crore at-least and with cash balance of Rs. 1,000 crore shall have to declare buy back of its shares.