8 unlisted PSUs buy back ~26 bn govt shares

Companies help meet ~1 trillion revised target for disinvestment

Eight unlisted state-owned companies bought back shares worth ~26 billion from the Centre in 2017-18 to help meet the revised disinvestment target of ~1 trillion.

However, though this is part of the disinvestment drive, the government’s stake in these companies remains 100 per cent even after the buybacks in which the shares were extinguished, the data on the website of the Department of Investment and Public Asset Management (DIPAM) shows.

These companies are Bharat Dynamics, Hindustan Aeronautics (both before their recent initial public offerings, or IPOs), Mazagon Dock Shipbuilders, IRCON, Garden Reach Shipbuilders & Engineers, HSCC (India), Security Printing and Minting Corporation of India (SPMCIL), and the Indian Space Research Organisation’s commercial arm, Antrix Corp.

Mazagon Dock, Garden Reach, and IRCON are readying for IPOs, while SPMCIL and HSCC (India) are candidates for ‘strategic sale’ (privatisation or closure) by the government. “These public sector undertakings (PSUs) bought back shares, which led to a reduction in their outstanding shares, all of which continued being held by the Centre. Hence the government’s stake in them remained 100 per cent,” said a government official.

The Centre has counted share buyback by PSUs as part of disinvestment proceeds since 2016-17. A new set of guidelines on the capital restructuring of state-owned companies was released that year. The guidelines made them more accountable in matters of dividends, buybacks, and bonuses, and was expected to help the government meet its non-tax revenue and capital receipts targets for the coming years.

On dividends, the guidelines stated that every PSU with a net worth of at least ~20 billion and a cash and bank balance of ~10 billion will exercise the option of share buyback.

“It has been observed that central PSUs are not looking into merit-based capital restructuring, including the option of buyback of shares, if they do not have plans to deploy surplus funds optimally for business purposes,” the guidelines had stated. In 2017-18, three listed PSUs bought back shares. In all, 11 state-owned companies have done share buybacks, which added nearly ~50 billion to the divestment kitty.