Capital Gains: Blue-Chip Psus May Pay Bonus

NEW DELHI: It’s party time for investors who have remained invested in public sector companies. The government plans to ask blue-chip PSUs including NTPC, BHEL, SAIL, ONGC, IOC, BPCL, HPCL and Gail to issue bonus shares, as their reserves and surplus have increased to several times their paid-up capital.

The Prime Minister’s Office (PMO) may issue a directive to PSUs having paid-up capital over Rs 100 crore to consider issuance of bonus shares.

“The department of public enterprises (DPE) has prepared a list of 75 PSUs, including about two-dozen listed companies that are sitting on huge reserves and surplus. Companies are shying away from issuing bonus shares. As the final decision is with the administrative ministries, DPE plans to take the PMO’s help to direct PSUs to issue bonus shares. PMO would intervene in case of such companies where paid-up capital would be Rs 100 crore or more,” a government official said.

According to official guidelines in place for public sector enterprises (PSEs), they should issue bonus shares to its shareholders if their reserves are in excess of three times their paid-up capital.

While retail shareholders of listed public sector companies stand to gain, the major beneficiary would be the government, the largest shareholder. Oil companies are currently reluctant to issue bonus shares even though IOC’s reserve and surplus are 29 times (Rs 33,365 crore) its paid-up capital (Rs 1,168 crore).

In case of HPCL, it is 28 times (reserves Rs 9,260 crore, paid-up capital Rs 339 crore), BPCL 27 times (reserves Rs 9,912 crore, paid-up capital Rs 362 crore), and ONGC 28 times (reserves Rs 59,785 crore, paid-up capital Rs 2,139 crore). Oil companies, suffering due to massive under-recoveries, lack the confidence to issue bonus shares.

“In the current market scenario, there is no certainty regarding revenue streams and therefore, issuance of bonus shares might result in reduction in dividend yield to the shareholders,” IOC chairman S Behuria told DPE.

But officials in the petroleum ministry as well as ministry of heavy industry and public enterprises do not buy this logic. “Most of the companies are sitting on huge reserves and they are not suffering from global oil-price hike. The shareholders must be appropriately rewarded,” an official in the petroleum ministry said.

PSU officials, especially from blue chip companies, consider the bonus share move an encroachment on their autonomy. Government officials do not agree.

“The government has vested the board of the navratna and mini-ratna companies with the final authority on the bonus issue. But this clause is applicable only as long as the companies have the stipulated number of independent directors on their board. Most of them do not meet this criterion,” a source in DPE said.

If the companies do not have the stipulated number of independent directors on their board, the government has right to intervene in their decision-making process.