Better appraisal for PSUs issuing bonus shares

Cash-rich public sector units (PSUs) like NTPC, BHEL, SAIL, ONGC and IOC which will issue bonus shares, largely accruing to the government, may get a better annual performance appraisal, sources said.

The Department of Public Enterprises (DPE) is working on this proposal which will encourage the top-notch PSUs to reward their shareholders by way of bonus shares.

Since the government holds an overwhelming majority shares in these companies, the benefits will accrue to it.

Under the proposal, the DPE is taking recourse to the old guidelines which stipulate that the PSUs having resources in excess of three times of their paid-up capital should immediately consider issuing bonus shares. Companies like NTPC, Bhel, SAIL, ONGC and IOC meet the criteria under consideration.

As these guidelines were not being regularly followed, the government intends to institutionalise and incentivise the PSUs which liberally issue bonus shares. This would be one of the key parameters on which the performance of the state-owned companies would be judged, sources said.

But before giving the bonus, the government-owned companies have to take into account the likely increase in the capital base which will result from free shares to its existing shareholders.

Besides, the ability of the company to service the large equity base should also be considered, sources said.

The government is under a pressure of meeting the fiscal deficit target of 4.6 per cent of the country's GDP, while economy seems to be in a slowdown mode.

PSUs are considered to be one of the most important sources of buffering government finances.