Faced with a revenue crisis, the government has asked wealthy state-owned companies to start paying dividends on a quarterly basis, even as it has demanded a larger share of the profits of all their companies.
Aiming for a “predictable and tiered” dividend regime, the government has also told state-owned companies not to follow the rules and pay the minimum dividend, but to work to increase payments.
“The CPSE [central public sector enterprises] Especially companies that pay relatively higher dividends (100 percent dividend or Rs 10 per share, as the case may be) may consider paying dividends on account every quarter after quarterly results. Other CPSEs may consider paying interim dividends generally semi-annually, ”stated the ‘notice of consistent dividend policy for CPSEs’ dated November 9. The statement, sent by the Department of Investment and Public Asset Management (DIPAM) to the CEOs of all CPSEs on November 9, said that the measure would help the government obtain predictable and periodic dividends as interim dividends before confirm the budget estimates. up.
All state-owned companies should consider paying at least 90 percent of the projected annual dividend, in one or more installments, as an interim dividend, according to DIPAM.
Most SOEs pay provisional dividends in February or March of a year today. “Such a grouping of provisional dividend payments by the CPSEs in February-March may compete with their availability of cash for year-end payments to suppliers, as well as for the payment of advance taxes,” explained the DIPAM. behind the move in the notice.
Government guidelines prescribe that SOEs pay a minimum annual dividend of 30 percent of PAT or 5 percent of net worth, whichever is greater.
“However, it has been observed that many CPSEs generally consider paying a minimum dividend according to the guidelines. CPSEs are encouraged to strive to pay higher dividends taking into account relevant factors such as profitability, capex requirements with due leverage, cash or reserves, and equity, ”the notice noted.
DIPAM further warned that only CPSEs without any “possibility” of paying dividends, in accordance with the prescribed minimum standards, can pay provisional dividends annually during October or November of each year based on projected profit after taxes, with the declaration of second quarter results.
“A consistent dividend policy would also help reactivate investor interest and improve market sentiment for CPSE shares, as the viability of regular or quarterly dividend payments would attract quality investors to CPSE shares and the I would retain in the hope of a future dividend, “the new DIPAM notice said.
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