India revises norms for dividend payout, share buybacks for state-run firms

REC

18/11/2024 15:06

By Nikunj Ohri
       NEW DELHI, Nov 18 (Reuters) - India has revised
guidelines 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 (NBFC) to pay a minimum annual dividend of 30% of
their profit subject to any present legal provisions, according
to guidelines by the federal finance ministry released on
Monday.
    Dividend payout limits for NBFCs are prescribed by the
Reserve Bank of India based on their capital requirement and
asset quality. Power Finance Corp  PWFC.NS  and REC Ltd
 RECM.NS  are the biggest government-owned listed NBFCs.
    Except for government-owned banks and insurance companies,
all state-run firms government have to pay a dividend of 30% of
profits or 4% of net worth, whichever is higher. Presently,
public sector companies have to pay an annual dividend of 30% of
profit or 5% of net worth, whichever is higher. The guidelines
will be applicable from the current financial year ending March
31, 2025.
   Firms whose share price is less than its book value for the
past six months, have a net worth of 30 billion rupees ($355.51
million) and a cash balance of 15 billion rupees have been asked
to consider share buybacks. 
    Past limits for share buybacks were a net worth of at least
20 billion rupees and cash and bank balance of 10 billion
rupees.
    The guidelines released on Monday 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.

($1 = 84.3860 Indian rupees)

 (Reporting by Nikunj Ohri; Editing by Anil D'Silva)
 ((nikunj.ohri@thomsonreuters.com; +91 90284 60730; Reuters
Messaging: twitter.com/nikunj_ohri))