Share Buy­backs by State-Run Com­pa­nies on the Cards

The Economic Times - - Economy: Macro, Micro & More -

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

Dheeraj Ti­wari & Deepshikha Sikar­war

New Delhi: 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 .₹ 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 cash and bank bal­ances of .₹ 4,627.98 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 de­part­ment may rope in un­listed pub­lic sec­tor en­ter­prises in the buy­back plan. Last year, the govern­ment raised .₹ 4,500 crore by sell­ing its shares back to Hin­dus­tan Aero­nau­tics and Bharat Dy­nam­ics. At end of March 2015, HAL had cash and bank bal­ance of al­most .₹ 18,000 crore on its books.

Cen­tral pub­lic sec­tor en­ti­ties had cash and bank bal­ances to­talling .₹ 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 ten­der/of­fer 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 dis­in­vest­ment tar­get for 2015-16 to .₹ 25,312 cro- re from .₹ 69,500 crore the pre­vi­ous 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.

NITI Aayog is iden­ti­fy­ing strate­gic stake sales that can be taken for­ward

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