Sebi wants cash-rich firms to have dividend distribution plan

Mumbai: With many big corporates sitting onhuge cash piles, regulator Sebi today said it wants listed companies to have a dividend distribution policy and hoarding  of cash should be discouraged. Sebi Chairman U K Sinha said the regulator is working on a proposal to encourage companies to distribute a certain amount of dividend among shareholders for a certain profit made by them.  He, however, added that this should not mean that the  entire cash should be distributed by the companies. 

"Nobody is asking that the entire cash should be paid, but there should be a dividend policy so there is some amount  of certainty that if a company is making an X percentage of  profit, then so much will be distributed.  "We are working towards it, and will take some time, it is in initial stage," Sinha said here at a conference on  corporate governance. The comments come at a time when a large number of  companies including Infosys, Bajaj Auto and Hero are said to  be sitting on large cash piles. There have often been demands that companies with large cash balances should either  distribute dividend or use the cash for other business needs.  Noting that there is a strong investor sentiment worldwide against companies hoarding cash and being stingy  with dividend payouts, Sinha said Sebi is ‘looking at a method  to incentivise corporate India to have a dividend distribution  policy’. 

"The world over there is a strong demand and that you are  seeing at corporate boards and in annual general meetings  there is strong demand that cash hoarding should be  discouraged," he added.  Pointing out that there is "no declared dividend policy  in the country," Sinha said, shareholders have been demanding  that the regulator ensure that at least there is a dividend  policy. On the new delisting norms announced by the Sebi board last week, Sinha said the endeavor is to relax the regulations  and make it easier for the companies. Countering arguments that the new norms were more stringent than the previous ones, Sinha said, "I think they  have been relaxed.

Earlier, when we came through our takeover regulations, it prescribed that if you reach over 75 per cent  and reach 90 per cent, then to de-list you have to first bring  down your stake below 75 per cent and then you have to file  another paper for delisting. 

"There was a two stage process. Don't forget that now in  one stroke we have removed that requirement which means if a  company has decided to get de-listed they can indicate its  willingness right in the beginning. The two stage-process has  been reduced to one stage process now," he said.  Sinha further said that in the new process, there would not be any pricing pressure from the promoter groups or other  shareholders.