Karachi: The Pakistan Stock Exchange (PSX) has released the criteria for the selection of the Top 25 Companies for the years 2024 and 2025, outlining a comprehensive set of prerequisites and evaluation metrics aimed at recognizing the highest-performing entities in the market. The announcement was made on October 15, 2023, and targets companies listed on the exchange that aspire to achieve this accolade.
To be eligible for consideration, companies must meet several prerequisites. They must have been listed for at least one full financial year, ensuring a minimum listing history of 12 months. A key financial requirement mandates a minimum dividend declaration of 30%, which should include at least a 15% cash dividend. Trading activity is also a critical factor, with companies required to have their shares traded on at least 75% of the total trading days of the year.
Compliance with regulatory standards is another essential criterion. Companies must not have been part of the Non-Compliant Segment of the Exchange, nor should trading in their shares have been suspended due to violations of the Listing of Companies & Securities Regulations during the year. Furthermore, they should not have faced penalties from the Securities and Exchange Commission of Pakistan (SECP) or PSX for non-compliance with any regulatory requirement. Additionally, there should be no outstanding complaints against the company during the calendar year, and elections of Directors must be conducted within the timelines specified by regulatory requirements.
The evaluation process for the Top 25 Companies is divided into quantitative and qualitative criteria. Quantitative measures include profitability ratios, such as return on equity and operating margin, liquidity ratios like the current ratio, and dividend-related ratios such as the dividend payout ratio. Market ratios and solvency ratios are also considered, alongside the free-float of shares as a percentage of total shares outstanding and share turnover on PSX trading systems.
On the qualitative side, the criteria encompass corporate social responsibility efforts, specifically monetary donations as a percentage of after-tax profit. Additionally, companies are encouraged to report on select Sustainable Development Goals (SDGs) in their annual accounts, including gender equality, clean water and sanitation, and climate action, among others.
Enterprise risk management reporting, diversity and inclusion initiatives, and corporate governance and investor relations are also key qualitative considerations. These include having more than one woman director on the board, reporting on the employment of differently-abled individuals, and early credit of dividends and bonus shares.
According to information available from the Pakistan Stock Exchange (PSX), the evaluation process aims to ensure that companies not only meet financial performance benchmarks but also adhere to high standards of governance, social responsibility, and transparency. The designated market category for these companies is the PSX's Top 25 Companies, which signifies their compliance with these rigorous standards.
Overall, the criteria underscore the PSX's commitment to fostering a robust, transparent, and socially responsible market environment, encouraging companies to strive for excellence in both financial and non-financial performance metrics.