Public Sector

Govt asks at least 8 PSUs to consider buybacks: Report

Govt asks at least 8 PSUs to consider buybacks: Report

Govt asks at least 8 PSUs to consider buybacks: Report

Govt asks at least 8 PSUs to consider buybacks: Report – The government has asked a minimum of eight state-run companies to think about share buybacks within the financial year that runs through March 2021, two officialdom said, as New Delhi scours for tactics of raising funds to rein in its fiscal deficit.

The firms asked include miner Coal India, power utility NTPC, minerals producer NMDC, and Engineers India Ltd, said one among the sources, who sought anonymity because the discussions are private.

To help in building market value buyback is a crucial tool in our strategy and it added the second official, who also spoke on condition of anonymity.

India is unlikely to be anywhere near its fiscal deficit target of 3.5% of GDP for 2020/21 as coronavirus curbs hit tax collections and delayed efforts to privatize energy firm Bharat Petroleum Corp and flag carrier Air India.

In February, the govt had set itself a target of raising quite $27 billion from privatizations and sale of minority stakes in state-owned companies this financial year.

However, some companies, particularly within the oil sector, might not be ready to do buybacks, the sources warned, because the government’s stake is simply sufficient to make sure its position as a majority holder.

As there’s a competing claim on their take advantage that government stake in these companies is about 51% and the shape of giant CAPEX commitment and dividend payments,” the second source said.

But for those with sufficient funds and cost below target for this financial year, the govt could seek approval from the cupboard to prune its stake to but 51% in individual firms without abandoning control, the official said.

India had tasked 23 state-run companies with a cost of ₹1.65 trillion ($22.5 billion) this financial year, but some firms face spending challenges because the world’s second-most populous nation adds virus infections.

The government had asked state-run firms to either meet their targets for cost or “reward the shareholder within the sort of a dividend,” the officials added.

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