DIPAM issues Revised Capital Restructuring Norms for CPSEs

Current Context: The Department of Investment and Public Asset Management (DIPAM) recently issued revised capital restructuring norms for Central Public Sector Enterprises (CPSEs). 

• Here are the key highlights:
• Dividend Payment: CPSEs are now required to pay a minimum annual dividend of 30% of net profit (PAT) or 4% of net worth, whichever is higher.
• Share Buybacks: CPSEs with a net worth exceeding ₹3,000 crore, a cash and bank balance above ₹1,500 crore, and a market price consistently below book value for six months may consider a share buyback.
• Bonus Shares: CPSEs with reserves and surplus equal to or more than 20 times their paid-up equity share capital are encouraged to issue bonus shares.
• Share Splits: Listed CPSEs, where the market price exceeds 150 times the face value of shares consistently for six months, may consider splitting shares. A cooling-off period of at least three years is mandated between two successive share splits.
• Interim Dividends: Listed CPSEs are mandated to pay at least 90% of the projected annual dividend in one or more instalments as interim dividends.
• Applicability: These guidelines apply to CPSEs and their subsidiaries where the parent central public sector enterprise holds more than 51% stake. They do not apply to public sector banks, public sector insurance companies, and certain other entities.

Question:

1 What is the minimum annual dividend Central Public Sector Enterprises (CPSEs) are required to pay under the revised capital restructuring norms?

• A) 10% of net profit (PAT) or 1% of net worth, whichever is higher
• B) 30% of net profit (PAT) or 4% of net worth, whichever is higher
• C) 50% of net profit (PAT) or 5% of net worth, whichever is higher
• D) 25% of net profit (PAT) or 2% of net worth, whichever is higher

Answer: B) The revised norms mandate CPSEs to pay a minimum annual dividend of 30% of their net profit or 4% of their net worth, ensuring better returns for the government and other shareholders.