The Indian government has revised guidelines for dividend payments, buybacks and stock splits at state-run companies to improve their operational and financial flexibility and boost shareholder returns.

State-run companies will be required to pay a minimum annual dividend of 30% of profit or 4% of net worth, whichever is higher, according to guidelines issued by the Department of Investment and Capital Asset Management. Currently, public sector companies have to pay an annual dividend of 30% of profit or 5% of net worth, whichever is higher. The government asked state-run non-banking financial companies to pay a minimum annual dividend of 30% of profit subject to any present legal provisions.

Additionally, companies with share prices lower than book value for the past six months, a net worth of Rs30bn (US$355.4m) and a cash balance of Rs15bn have been asked to consider share buybacks. Earlier, a net worth of at least Rs20bn and a cash and bank balance of Rs10bn were considered limits for share buybacks.

State-run companies have also been asked to consider stock splits if the share price exceeds 150 times face value for the last six months. The government also asked that there be a cooling off period of at least three years between two successive stock splits.

These companies will also be required to issue bonus shares if their reserves are 20 times or more of share capital, up from the earlier five times.

Source: IFR