Now Check This Before Buying Shares

New Rule-Now Check This Before Buying Shares, Otherwise Don’t Cry Later!

Education

Now Check This Before Buying Shares, Otherwise Don't Cry Later.

Corporate actions such as dividends, bonuses, stock splits, and buybacks significantly impact share value and investor returns. Recently, new rules and guidelines have been introduced, particularly for public sector undertakings (PSUs) or government companies. Let's break these updates into simple terms so you can make informed decisions when buying shares.

Table of Contents

1. Dividends

Government companies now have new rules regarding dividend payouts:
Minimum Dividend Mandate:

Companies must pay a minimum annual dividend equal to 30% of their net profit (profit after taxes) or 4% of their net worth, whichever is higher.

For government-owned NBFCs (Non-Banking Financial Companies), the rule is simplified to 30% of net profit, excluding the net worth clause.

Implementation Timeline:

These rules take effect from FY 2025, ensuring transparency and consistency in dividend distribution.

Investor Tip:

Stay aware of these regulations to understand the potential returns when investing in PSUs.

Now check this before buying shares otherwise don't cry leter
This is only for educational purpose

2. Bonuses

The issuance of bonus shares is now linked to a company’s reserves and surplus:

Eligibility:

A company can issue bonus shares only if its reserves and surplus are at least 20 times its paid-up equity share capital.

How to Evaluate:

Check the balance sheet of a company for its "paid-up equity share capital" and ensure its reserves meet the threshold.

Investor Tip:

Companies with strong reserves are better positioned to issue bonuses, potentially increasing your shareholding without additional investment.

3. Stock Splits

New criteria for stock splits have been introduced:

Market Price Threshold:

A stock is eligible for a split if its market price consistently exceeds 150 times its face value for the past six months.

For instance, if the face value is ₹2, the stock price must be at least ₹300 for six consecutive months to qualify.

Cooling Period:

Once a split is announced, the company must wait for three years before another split can occur.

Investor Tip:

Monitor stock price trends and face value to identify potential split candidates and understand market value shifts.

Read Also: Why Did the Market Suddenly at Fall 19th Nov 2024

4. Buybacks

The government has tightened the rules for buybacks by public sector companies. A company can consider a buyback only if it fulfills the following three conditions:

• The market price of the stock must remain below the book value consistently for six months.

• The company must have a minimum net worth of ₹3,000 crores.

• It should have at least ₹1,500 crores in cash reserves.

If all these conditions are met, the company may proceed with a buyback.

Investor Tip: Look for buyback announcements from companies fulfilling these criteria, as they can indicate a positive signal about the company’s confidence in its valuation.

Final Takeaway:

These updates to corporate actions by government companies are designed to create transparency and protect investor interests. As a savvy investor, Now Check This Before Buying Shares, Otherwise Don't Cry Later! Pay attention to these rules when evaluating stocks, especially PSUs , to maximize your returns and make informed decisions.

Dividend yield in government companies is going to increase, this will impact the shares of every government company.

Conclusion:

Corporate actions like dividends, bonuses, splits, and buybacks can significantly influence your investments. With the new guidelines in place, PSUs are now mandated to operate under stricter frameworks to ensure shareholder value. Before investing, research these parameters, check financials like net worth and profits, and stay updated on company announcements. An informed investor is a successful investor. Happy investing!
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