More public sector units may be asked to go in for share buybacks and listing this fiscal as the government tries to improve their financial performance and restructure balance sheets of firms sitting on idle cash.

The move is a follow-up of Finance Minister Arun Jaitley’s Union Budget announcement to improve the financial management of public sector units by addressing issues such as capital restructuring, dividend and bonus shares.

“The return on investments of PSUs has to be seen from an investor’s point of view. If these firms are sitting on idle cash deposits or putting them in bank deposits rather than in expansion activities, it is better that they go for capital restructuring through activities such as share buybacks,” said a senior Finance Ministry official, adding that a new dividend policy has already been formulated to this end.

Cash and idle reserves of PSUs is estimated at over ₹2.6 lakh crore. In 2015-16, two public sector units — Hindustan Aeronautics Ltd and Bharat Dynamics Ltd — have already gone in for share buybacks that helped raise ₹4,500 crore.

Buyback and listing of PSUs is also expected to help the government meet its disinvestment target of ₹36,000 crore from minority stake sales this fiscal.

Evaluations on

“The economic logic is that the investment in PSUs should earn more than the bank rate. Else, they should be asked to go in for capital restructuring,” said the official.

The newly renamed Department of Investment and Public Asset Management (DIPAM or formerly known as Department of Disinvestment) as well as the Department of Public Enterprises are already working on this and are evaluating the performance of PSUs on parameters, including operational efficiency, paid-up capital and reserves, as well as dividends and investments as a percentage of profit after tax.

While the DPE is already monitoring the capacity expansion by PSUs on a monthly basis, the new memorandum of understanding of state-run firms for 2016-17 will also evaluate PSUs on these benchmarks, the official said.

Listed PSUs in need of cash will also be encouraged to go to the market, instead of seeking government assistance.

“Unlisted PSUs will be encouraged to list to fund their capital requirements, not only due to the limited finances of the government but also to bring in more transparency and accountability,” said the official. According to official estimates, there are over 140 PSUs that are unlisted, despite being profitable making for three years as on March 31, 204.

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