The Finance Ministry has asked cash-rich public sector undertaking to buy back Government’s equity in various companies.
According to the Finance Ministry officials, letters have been sent to all cash-rich PSUs enquiring about their cash balance and capital expenditure (CAPEX) plans.
However, the Heavy Industries and Public Enterprises Ministry says that there is no specific plan at the moment.
Buy-back is a mechanism which allows a company to take back the shares and pay by using reserves and cash balances. This helps the promoters to get money. Since shares bought back need to be extinguished, this also helps the value of shares to go up as there will be lesser number of shares available (liquidity) for buy and sell. The Government wants to use this tool for its disinvestment target of Rs 40,000 crore for 2013-14.
“We have told them if they do not have sufficient capex plans they should buy back Government share or pay higher dividend,” a senior official said. This process is likely to start with Coal India. There is proposal to divest 10 per cent in Coal India. This could be the combination of offer-for-sale and buy back. A final call on the timing of the sale will be taken by the Cabinet Committee on Economic Affairs.
Meanwhile, the Heavy Industries and Public Enterprises Minister Praful Patel said there is a disinvestment programme of the Government which is ongoing and which covers some of the PSUs which have been identified.
The Finance Minister has stated earlier that all the PSUs which have been sitting on surplus cash they should use that money for investing into their companies to grow rather than sitting on a pile of money.
“If you are not going to use that money then rightfully it should be parked with the Government but that is not the case in terms of most CPSEs which are aggressively pursuing their expansion or diversification plan and, therefore, if at all such a situation arises we will see it but at the moment there is no specific,” Patel Said. According to answer given to the Parliament, 17 CPSEs including Coal India, ONGC, NMDC and Oil India had over Rs 1.62 lakh crore cash reserves during 2012-13.
The CPSEs usually use their cash and bank balance for commercial purposes including capital expenditure and expansion, payment of dividend and tax, discharge of liabilities and working capital. This can also be used for buy back which was approved last year as a tool under disinvestment programme. However, this is yet to be used.