Planning for non-core asset sale, govt dividend now mandatory for PSUs

Listed public sector firms will have to maintain their m-cap at a certain level

Government-owned entities would now be mandatorily required to outline a plan for non-core asset monetisation, payment of assured sum as dividend to the government and steps taken to increase market capitalisation of listed public sector undertakings (PSUs).
 
These conditions have now been included in the memorandum of understandings (MoUs) that public sector enterprises sign with the department of public enterprises (DPE) every year.
 
This is used to set annual targets based on which their performance is reviewed. MoUs signed between the government and PSUs have certain other targets like profit after tax (PAT), production and capital expenditure (capex), among others.
 
In November-end, Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey, at an industry event, had advocated including asset monetisation as part of MoUs between the government and PSUs.
 
He had also said that increasing market capitalisation of PSUs should be a key area of focus for government-owned companies. These have now been included in the MoUs of PSUs by DIPAM, and sent to the DPE, said a top government official.
 
Public sector enterprises have been negligent of the government’s push to monetise state-owned entities’ idle assets. This has led to their inclusion in MoUs, the official said. PSUs were not showing interest in selling their assets despite constant nudge by the government, he said, adding that one of the reasons is the fear of scrutiny.

 
Unlike earlier, Central Public Sector Enterprises (CPSEs) will have to mandatorily identify assets and apprise the government about the plan and steps taken by companies to sell their assets.
 
This would be one of the additional performance parameters of the PSUs. If they are not able to sell all the assets that are mentioned in the MoUs in any year, they will be held accountable for that.
 
CPSEs can sell off these assets on their own, and also seek DIPAM’s help if assets are valued over Rs 100 crore.
 
The listed PSUs will also have to maintain their market cap at a certain level, and increase it to a pre-decided level. An assured amount of dividend will also have to be promised by the PSUs. These targets will be set considering their performance in the last five years, the official said.
 
Currently, PSUs are required to pay a minimum annual dividend of 5 per cent of their net worth or 30 per cent of PAT, whichever is higher. However, this does not currently feature in the MoUs but in the guidelines of DIPAM. In the MoUs, PSUs have to mention the dividend they are going to give to the government which may be higher than this minimum amount. Recently, DIPAM has asked firms to transfer interim dividend to the government quarterly and half yearly from the annual payout, currently.
 
A higher market capitalisation and dividend will help the government increase divestment receipts from stake sales. The conditions have been added so that PSUs proactively work on these areas, the official said.