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State-owned Oil and Natural Gas Corporation (ONGC) on Friday said its board will consider buyback of company shares at a meeting on December 20.
This follows government pushing cash-rich PSUs to use their funds to buyback shares or pay a higher dividend. The government is looking to bridge budgetary deficit through higher receipts of dividend as well as selling its shares in PSUs in the buyback programmes.
Stock buybacks refer to the repurchasing of shares by the company that issued them. A buyback occurs when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors.
In a regulatory filing, ONGC said: “The meeting of Board of Directors of the company will be held on Thursday, December 20, 2018, inter-alia, to consider the proposal for buy-back of the fully paid-up equity shares of the company.”
The government holds 67.48 per cent stake in India’s largest oil and gas producer ONGC.
Just on Thursday, state-owned Indian Oil Corporation (IOC) said it will buy back 29.76 crore shares for about ₹ 4,435 crore and spend another ₹ 6,556 crore on paying an interim dividend to shareholders.
The board on Thursday approved buyback of up to 29.76 crore equity shares, or 3.06 per cent, at ₹149 per share.
The government, which holds a 54.06 per cent stake in the company, is expected to participate in the share buyback.
The government is targeting a minimum ₹5,000 crore through share buyback offers of state-owned firms like Coal India, BHEL and Oil India Ltd.
Besides IOC, at least half a dozen other central PSUs have disclosed share buyback programmes. Prominent among these include NHPC, BHEL, NALCO, NLC, Cochin Shipyard and KIOCL that could fetch the government a little over Rs 3,000 crore.
The government is expected to participate in each of the share buyback programme of these PSUs.
IOC had also stated that its board has declared an interim dividend of 67.5 per cent or ₹ 6.75 per share for fiscal 2018-19.
The total dividend payout, excluding tax, would be ₹6,556 crore, of which the government will get ₹3,544 crore plus the dividend distribution tax.
Last month, Oil India Ltd announced a buyback of 5.04 crore of its share for a little over ₹1,085 crore.
The Department of Investment and Public Asset Management (DIPAM), which has been set a target to raise ₹80,000 crore for the government through stake sale in central public sector enterprises, had prodded all cash-rich PSUs to go for share buybacks.
PSUs having a net worth of at least ₹2,000 crore and a cash balance of more than ₹1,000 crore have to mandatorily go in for share buyback.
Of the₹80,000 crore disinvestment target, the government has so far raised just over ₹15,000 crore through minority stake sale in PSUs.
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