Government Plans To Nudge Mutual Funds Towards PSUs, Seek Fair Dividends From Private Sector

The government is looking to nudge mutual funds to increase exposure in central public sector enterprises in their investor portfolios, as it believes that fund managers have not been adequately guiding small investors.

Additionally, the government may push private listed companies to offer fair dividends to minority shareholders.

“We will suggest that fund managers include PSU stocks in their portfolios. This will ensure that common investors, senior citizens, and minority shareholders can deploy their savings productively. We will also nudge private corporates to declare fair dividends to their minority shareholders,” said Arunish Chawla, secretary of the Department of Investment and Public Asset Management, while briefing the media on Wednesday.

Sources revealed that DIPAM officials are expected to meet with mutual funds in Mumbai next week, as they believe fund managers are not doing enough to guide small investors.

DIPAM handles all matters related to the sale of central government equity in CPSEs through methods like offers for sale, private placements, and strategic disinvestments. The department also advises the government on the financial restructuring of CPSEs and works to attract investment in these enterprises via the capital market.

Chawla highlighted the value creation strategy of PSUs and the positive results it has yielded. “CPSEs have distributed a record dividend in FY25, amounting to approximately Rs 1.5 lakh crore, of which the government's share was Rs 74,016 crore. Notably, even though the market capitalisation of PSUs is only 10% of the overall market cap, they distributed 25% of the total dividends,” he said.

Chawala further added that “PSUs tend to offer more stable and potentially better dividend payout relative to earnings while Nifty 50 companies display greater variance and lower central tendency”

Strategic Shift

The government plans to continue sharing PSU wealth with citizens, but strategies will be adjusted according to market conditions. Chawla explained that DIPAM has developed an in-house policy framework called the 'DIPAM Model', which ensures that each unit within the ministry follows a common strategy based on hard data and market performance.

“We have revised our strategy and introduced a new framework focused on capital asset pricing. This framework addresses the trade-off between dividend flow and asset prices, and tracks market volume, PSU stock settlement, and volume-weighted averages,” he added.

IDBI Bank Update

Chawla also provided an update on the strategic sale of IDBI Bank, confirming that the government has appointed asset valuers for the bank and is deliberating on a share purchase agreement with prospective buyers.

“We are moving ahead with the IDBI Bank strategic sale as per the government's decision. We have established a virtual data room, and the facility to address queries is functioning well. We have also appointed an asset valuer and are deliberating on the shareholder agreement,” Chawla said. He also mentioned that there are several other strategic disinvestments in the pipeline for the current fiscal year.