How four PSUs are paying dividends in record time

Four public sector undertakings are paying an out-of-turn interim dividend to help govt

Four public sector undertakings—Indian Oil Corporation, Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Coal India — are paying an out-of-turn second interim dividend to help the government shore up its revenues. Most of these companies paid interim dividends less than a month ago. To ensure the latest dividend payout take place before the end of the fiscal, the state-owned entities had to obtain market regulator Securities and Exchange Board of India’s (Sebi’s) leeway on certain regulations.

Which are the regulations on which exemption was sought? 

The state-owned entities got exemption from the applicability of regulation 29(2), regulation 42(2) and regulation 42(3) of Sebi LODR (listing obligations and disclosure requirements) Regulations, 2015.

What are these regulations?

Regulation 42 acts as a guideline for all listed entities on intimation of record date during declaration of dividend, issue of bonus or right shares and other corporate actions like mergers, de-mergers, stock splits, among others.

Regulation 42(2) says the listed entity shall give notice in advance of at least seven working days (excluding the date of intimation and the record date) to stock exchanges of record date specifying the purpose of the record date.

Regulation 42(3) says the listed entity shall recommend or declare all dividend and/or cash bonuses at least five working days (excluding the date of intimation and the record date) before the record date fixed for the purpose.

Regulation 26 pertains to giving prior intimation to stock exchanges about the meeting of board of director for proposals such as declaration of dividends, financial results, among others.

Regulation 29(2) says the intimation shall be given at least two working days in advance, excluding the date of intimation and date of the meeting.

Why were these exemptions sought?

On March 22, Indian Oil, HPCL and BPCL made a stock market announcement that their board would meet the next day to declare second interim dividend. Without the exemptions, these companies wouldn’t have been able to conduct the board meeting the next day. Further, the record date for the dividend was fixed at March 27—a gap of just one working day. Had Regulation 42(2) been applied, the record date would have been April 3. As a result, the payout would have taken place next fiscal and impacted government’s budget estimates for 2016-17.