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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

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