Govt ask cash rich PSUs to issue bonus shares to improve their market image

The government has asked cash rich PSUs to issue bonus shares to bring about a proper balance between paid up capital and accumulated reserves, a move aimed at improving market image of state run firms.

The Department of Public Enterprises (DPE) in an internal note to different ministries said that there are a number of Central Public Sector Enterprises (CPSEs) which have reserves and surpluses more than three times of their paid up capital.

"Such a situation does not reflect equitable capital base of the company. Further, CPSEs declare the dividend on lower capital base," it said.

Referring to a 1995 instructions on bonus shares , the DPE note said "...concerned administrative ministries are requested to...direct the CPSEs under their control to examine and approve the bonus share proposals".

In 1995 the DPE had issued instructions that such PSUs should immediately consider the scope of issuing bonus shares to Government of India and other existing shareholders.

The issue of bonus shares helps in bringing about a proper balance between paid up capital and accumulated reserves.

Besides, it helps elicit good public response to equity issues of the public enterprises and helps in improving market image of the company, as per guidelines of DPE.

The DPE note further said that PSUs having large reserves may be allowed to make any public issue only after examining the scope for capitalising a portion of the reserves.

The government plans to list all profit making PSUs.