Share buybacks could become the most successful mechanism for the Centre to meet its disinvestment target. By next month, proceeds from share buybacks alone are expected to touch about ₹17,000 crore.
Combined with the ₹2,711-crore from the stake sale in NHPC, the Centre will earn close to ₹20,000 crore from disinvestment by October.
While Coal India Ltd and Bharat Electronics Ltd have announced plans to buyback their equity shares next month, state-run Nalco has already bought back 64.43 crore equity shares that will fetch ₹2,835 crore.
Meanwhile, NMDC and MOIL are also in the midst of similar exercise that are expected to raise ₹7,527 crore and ₹863 crore, respectively.
The Finance Ministry had in May this year issued guidelines for capital restructuring under which profit-making PSUs are expected to utilise their idle capital, if not through expansion, then through exercises such as stock split and share buyback. “This is in line with the guidelines. We expect more firms to finalise plans over the next few months, which could help raise another ₹10,000-₹15,000 crore this fiscal,” said an official familiar with the development, adding that the total amount raised from share buybacks could touch at least ₹30,000 crore this fiscal.
Sources said firms such as BHEL and other PSUs in sectors such as power and oil may announce plans for buyback of their shares. CIL’s buyback offer, which will open on October 3, is estimated to raise ₹3,650 crore, while BEL’s buyback could raise about ₹2,171 crore.
Receipts from these exercises will be added to the Centre’s disinvestment proceeds that are targeted at ₹56,500 crore for 2016-17. Of this, ₹36,000 crore is estimated from minority stake sale in PSUs, and the remaining is projected to come from strategic sales.
The government is now hopeful of meeting its target from disinvestment proceeds for this fiscal.
Similarly, the Centre had used the buyback route to bridge the shortfall in its mop-up from disinvestment and had raised ₹4,500 crore from share buybacks by Hindustan Aeronautics Ltd and Bharat Dynamics Ltd in 2015-16.
Meanwhile, the Department of Investment and Public Asset Management is also working on a line-up for minority stake sales. “Permissions are already there. The market conditions are being monitored. There could be one stake sale around Diwali,” said an official, adding that the exchange traded fund for PSUs will also be launched by early 2017.