The PSUs In Focus As Government Looks At Buybacks To Meet Divestment Target
Share buybacks by PSUs can contribute substantially to government’s divestment proceeds.
Share buybacks by public sector companies could contribute substantially to the divestment proceeds as the government managed to raise less than a fifth of the targeted Rs 80,000 crore in the first seven-and-a-half months of the financial year.
Prime Minister Narendra Modi’s administration has so far mopped up Rs 15,000 crore through initial public offers of state-owned companies. Bloomberg reported last month citing unnamed people that the government asked public sector companies to repurchase its shares worth Rs 20,000 crore. Here are the companies that will or could contribute:
Buybacks Worth Rs 4,400 Crore Announced
Six state-owned firms announced cumulative buybacks worth Rs 4,396 crore in the last one month, according to their statements. These include Bharat Heavy Electricals Ltd., Cochin Shipyard Ltd., National Aluminium Company Ltd., NLC India Ltd., Kudremukh Iron Ore Company Ltd. and NHPC Ltd.
Four More PSUs May Chip In
At least two more— Oil India Ltd. and Oil & Natural Gas Corporation Ltd.— announced they will also consider buying back shares. Bloomberg reported that the government also asked NMDC Ltd. and Indian Oil Corporation Ltd. to repurchase shares. Only two of these four—NMDC & Oil India—had surplus cash as of September, according to their filings.
Cash-Surplus State-Run Companies
In all, there were 16 cash-rich state-run companies as of September that can potentially repurchase shares to help the government meet its selloff target. These include Coal India Ltd., MOIL Ltd., NMDC, BEL and Engineers India Ltd. that bought back shares in the previous two years.
To be sure, none of them have yet said publicly that they intend to contribute to the government’s divestment target.
According to buyback rules, a company can repurchase shares worth up to 25 percent of its net worth with shareholder approval or buy back 10 percent without that.
Buybacks In The Past
In the last two financial years, about 10 companies conducted buybacks worth Rs 25,000 crore, with BEL and MOIL contributing in both the years.