In­dia to tap $12b of state firms’ cash with buy­back

The Pak Banker - - BUSINESS -

In­dia's govern­ment has asked state-run com­pa­nies to buy back shares, peo­ple with knowl­edge of the mat­ter said, as Prime Min­is­ter Naren­dra Modi looks to nar­row Asia's widest bud­get deficit with­out cut­ting stim­u­lus spend­ing.

The boards of Coal In­dia Ltd., MOIL Ltd., NMDC Ltd., Na­tional Alu­minium Co. Ltd., In­dia Re­new­able En­ergy De­vel­op­ment Agency Ltd. are among those that will have to de­cide on val­u­a­tions, the peo­ple said, ask­ing not to be iden­ti­fied as the talks are pri­vate.

Th­ese com­pa­nies had about 784.5 bil­lion ru­pees ($ 11.6 bil­lion) in cash and mar­ketable se­cu­ri­ties last year, ac­cord­ing to data com­piled by Bloomberg, more than dou­ble Modi's so­cial wel­fare bud­get.

A rev­enue boost is cru­cial as back-to-back years of weak rain­fall com­pel Modi to spur de­mand in ru­ral ar­eas even as pres­sure mounts to avoid run­away spend­ing.

The ru­pee, sov­er­eign bonds and stocks had their worst Jan­uary since 2011, weighed down by the global slow­down and as con­cerns about fis­cal slip­page mount.

While weak global de­mand de­nies com­pa­nies ad­e­quate re­turns on their in­vest­ment, fall­ing share prices of­fer them a good chance to con­sol­i­date own­er­ship, the peo­ple said. About 50 listed state-run com­pa­nies had a to­tal 2 tril­lion ru­pees in cash and mar­ketable se­cu­ri­ties in 2015.

"The Fi­nance Min­istry has writ­ten to us about a 25 per­cent share buy­back by Nalco," Mines Sec­re­tary Balvin­der Ku­mar said last week, re­fer­ring to Na­tional Alu­minium. While the depart­ment was ex­pect­ing 13 bil­lion ru­pees from a 10 per­cent stake, it can't say for sure how much it will re­ceive, he added.

IREDA Chair­man KS Po­pli said the govern­ment's de­ci­sion is a "good move" that will im­prove com­pa­nies' val­u­a­tions and earn­ings per share.

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