The revised guidelines for the capital restructuring of Central Public Sector Enterprises (CPSEs), effective from FY 2024-25, bring key changes to dividend payments, buyback criteria, bonus share issuance, and share splitting. The minimum annual dividend remains 30% of PAT, but the net-worth threshold reduces from 5% to 4%, while financial-sector CPSEs base dividends solely on PAT. For buybacks, new thresholds require a market price below book value for six months, with net-worth and cash balance criteria raised to ₹3,000 crore and ₹1,500 crore, respectively. If buybacks are unfeasible, CPSEs can consider higher or special dividends. Bonus share issuance now applies only when reserves exceed 20 times paid-up equity, compared to previous 5-10 times limits. Share splits require a market price exceeding 150 times face value for six months, up from 50 times, introducing a cooling-off period of three years between splits. These guidelines, replacing those issued in 2016 and subsequent updates, enable CPSEs to retain resources longer while revising thresholds to align with financial and operational sustainability.
Revised Guidelines dated 18th November, 2024 on Capital Restructuring of CPSEs (applicable from FY 2024-25)
| Sl. No. | – | Old | Revised | Remarks | Impact on CPSEs |
| 1 | Payment of Dividend | Minimum annual dividend of 30% of PAT or 5% of the net-worth, whichever is higher subject to the maximum dividend permitted under the extant legal provisions | Minimum annual dividend of 30% of PAT or 4% of the net-worth, whichever is higher subject to limit, if any, under any extant legal provision. | PAT criterion remains same while net-worth criterion reduced from 5% of to 4% | POSITIVE
-Company may pay lower dividend, even if 4% of the net-worth comes higher |
| – | Financial sector CPSEs like NBFCs may pay minimum annual dividend of 30% of PAT subject to limit, if any, under any extant legal provisions. | NBFCs may pay only on the basis of PAT | |||
| – | > Interim dividend every quarter after quarterly results, or at least twice a year.
> At least 90% of projected annual dividend, in one or more instalments as Interim dividend |
Staggered dividend esired | |||
| 2. | Buyback of Shares | > Surplus cash and bank balance need to be considered
> Criteria: CPSE having net-worth of at least Rs. 2000 Crore and cash and bank Balance of over Rs. 1000 Crore shall exercise the option to buy-back their shares. |
Criteria: CPSE,
(i) whose Market price of the share is less than the book value consistently for the last six months, and (ii) having net-worth of at least Rs. 3000 Crore and cash & bank balance of over Rs. 1500 Crore may consider the option to buy-back their shares. > If buyback is not considered desirable for a CPSE with excess cash, but no committed expenditure, company may consider paying higher or special dividend to the shareholders. |
1. Criteria of market price and consistency in price for six months period introduced
2. Threshold changed (i) Net-worthRs.2000 Crore to Rs.3000 Crore (ii) Cash & bank balance – Rs.1000 Crore to Rs.1500 Crore 3. Higher/ Special dividend if buyback is not considered desirable |
POSITIVE
– Increase in threshold will enable the Company to retain resources for longer duration which can be used for lending |
| Every CPSE shall look into and analyse/ deliberate in first Board meeting after the closure of the financial year the following parameters for the purpose of buyback:
(i) Cash and Bank balance; (ii) Capital Expenditure and business expansion as committed with reference to the CAPEX incurred in the last 3 years; (iii) Net-worth [Free reserves and paid-up capital, including other reserves (if any)]; (iv) Long-term borrowing and further capacity to borrow on the basis of its ‘Net worth’; (v) Any other financial commitments in the near future. (vi) Business/ other receivables and contingent liabilities, if any; and (vii) Market price/book value of share. |
CPSE should look into and analyse/ deliberate in first Board meeting after the closure of the financial year, the following parameters for the purpose of buyback:
(i) Cash and Bank balance; (ii) Capital Expenditure and business expansion as committed with reference to the CAPEX incurred in the last 3 years; (iii) Net-worth [Free reserves and paid-up capital, including other reserves (if any)]; (iv) Long-term borrowing and further capacity to borrow on the basis of its ‘Net worth’; (v) Any other financial commitments in the near future. (vi) Business/other receivables and contingent liabilities, if any; and (vii) Market price/book value of share. |
No Change | – | ||
| 3. | Issue of Bonus Shares | Every CPSE should look into and analyze/ deliberate in their Board meeting/Finance Committee, the issue of bonus shares when their defined reserves and surplus are equal to or more than 5 times of its paid-up equity share capital. Every CPSE shall issue bonus shares if their reserves and surplus is equal to or more than 10 times of its paid-up equity share capital. | Every CPSE may consider the issue of bonus shares when their defined reserves and surplus are equal to or more than 20 times of its paid-up equity share capital. | Threshold changed from 5/10 times to 20 times | POSITIVE
-No need to capitalize at least till reserves and surplus are less than 20 times of its paid-up capital. |
| 4. | Splitting of Shares | > Market price or book value of its share exceeds 50 times of its face value | > Market price exceeds 150 times of its face value
> Consistently for the last six months |
1. Criteria changed from market price or book value to market price only.
2. Threshold changed from 50 times to 150 times 3. Introduction of consistency in price for six months |
NEUTRAL
-No requirement of mandatory split till share price crosses Rs.1500 (earlier Rs. 500) |
| Cooling off period of at least three years between two successive share splits. | Cooling off period introduced |
Note: Revised Guidelines supersede earlier guidelines dated 27th May, 2016 and subsequent advisories dated 9th November, 2020, 18th January, 2023, 9th October, 2023 and 18th October, 2023.
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