Share Buybacks by State-Run Companies on the Cards

FAST-PACED MOVE Disinvestment receipts are crucial for meeting fiscal deficit target, given that govt wants to continue public capital spending

Big-ticket share buybacks by state-run companies, including Coal India and ONGC, are on the cards to help the government meet its disinvestment target for the year. Cash-rich central public sector enterprises are expected to lead this drive to ensure that the Rs.56,500-crore target is met.“To professionally manage surpluses, some CPSEs are considering merit-based restructuring of capital, which includes buybacks.These are being considered on a case-to-case basis,“ said a senior official with the Department of Investment & Public Asset Management.

At present, the government is looking at a 10% buyback in National Aluminium Company , which had Rs.4,627.98 cash and bank balances of ` crore at end of March 2015. Other cash-rich companies that may offer buybacks include Coal India, Oil & Natural Gas Corp., NMDC, Bharat Heavy Electricals and NTPC.The de partment may rope in unlisted public sector enterprises in the buyback plan.

Last year, the go vernment raised Rs.4,500 crore by selling its shares back Aeronautics and Bharat Dynamics. At end of March 2015, HAL had cash and bank balance of almost Rs.18,000 crore on its books.

Central public sector entities had cash and bank balances totalling Rs.2.55 lakh crore at 2015 March-end. Replying to a question in parliament on tapping of idle cash with CPSEs, minister of state for finance Jayant Sinha said such companies have the option of capital rest ructuring. “In view of such offers, the government may agree to tenderoffer equity, if a CPSE decides to buy back its own shares in the process,“ he said. “Government considers these offers for buyback by CPSEs on merits on a case-to-case basis and may participate in the process as an investor,“ he said, adding that companies in the oil, energy and capital goods sectors have been identified for selling stake.

Disinvestment receipts are crucial for meeting the government's fiscal deficit target, given that it wants to continue with fast-paced public capital spending. The share buyback is part of a multi-pronged government plan to ensure that the target is met. The government retained the fiscal deficit targets for 2015-16 and 2016-17 at 3.9% and 3.5% of GDP, respectively .

“Disinvestment target would be achieved,“ economic affairs secretary Shaktikanta Das told ET. The government scaled down disinvest Rs.25,312 croment target for 2015-16 to Rs.69,500 crore the previous from year. Das said the plan has strategic and non-strategic components.“On non-strategic side, we have included buyback of shares,“ he said.

“Buyback of shares is in case of 100% government-owned companies that are cash rich and do not have adequate capital expenditure programme. There are other companies that are listed and cash rich. In these, it would be buyback and disinvestment. List of CPSUs has been finalised by the department of disinvestment,“ he added.

On strategic stake sales, NITI Aayog is identifying those that can be taken forward, Das said. A core group of secretaries on disinvestment chaired by the cabinet secretary will supervise and monitor the implementation of decisions on strategic disinvestment.

Economics Times, New Delhi, 27 April 2016

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said. Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm

Credit card spending growth declines on RBI gaze, stress build-up

Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem. “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and

CA Online

Search This Blog