Up to eight unlisted state-owned companies bought back shares from the Centre worth Rs 26 billion in 2017-18, to help meet the overall revised disinvestment target of Rs 1 trillion. In spite of being a part of the disinvestment drive, the government’s stake in these companies remained 100 per cent even after the buybacks, data on the website of Department of Investment and Public Asset Management (DIPAM) shows.
These companies are Bharat Dynamics and HAL (both before their recent initial public offerings), Mazagon Dock Shipbuilders, IRCON, Garden Reach Shipbuilders, HSCC India Ltd, SPMCIL, and Indian Space Research Organization (ISRO)’s commercial arm Antrix Corp.
Mazagon Dock, Garden Reach and IRCON are also up for IPOs while SPMCIL and HSCC India are candidates for ‘strategic sale’ (privatisation or closure) by the government.
“These PSUs bought back shares which led to a reduction in their outstanding shares, all of which continued being held by the centre. Hence the government’s stake in them remained at 100 per cent,” said a government official.
The centre has counted share buybacks by PSUs as part of disinvestment proceeds since 2016-17. A new set of new guidelines on capital restructuring of state-owned companies was released that year, which made them more accountable on matters of dividends, buybacks and bonuses and was expected to help the government meet its non-tax revenue and capital receipts target for the coming years.
On the matter of dividends, the guidelines stated that every PSU with a net-worth of at least Rs 20 billion and cash and bank balance of Rs 10 billion will exercise the option of buyback of shares. “It has been observed that CPSEs are not looking into merit-based capital restructuring including the option of buyback of shares if they do not have plans to deploy surplus funds optimally for business purposes,” the guidelines had stated.
For 2017-18, there have been three other listed PSUs that have bought back shares. In 2017-18. In total, 11 state-owned companies carried out share buybacks which added nearly Rs 50 billion to the divestment kitty.