Friday, November 25

PSUs buyback on cards; cabinet note floated

A cabinet note on buyback for inter-ministerial consultation has been floated by the Department of Disinvestment and 10 public sector units (PSUs) will be identified for the same, reports CNBC-TV18’s Aakansha Sethi.

The note proposes buybacks and crossholdings in PSUs, which has been doing the rounds for many weeks now that the government is determined to push through contentious proposals. You have seen FDI in retail go through yesterday and the government is now working on alternate strategies to disinvestment as well as on FDI in aviation.

It was only last week that ICICI Securities and the Department of Disinvestment had prepared a white paper on alternate strategies to disinvestment because the government is far from meeting its Rs 40,000 crore disinvestment target. Other alternate strategies which will not include dependence on markets have been proposed.

The government is looking at PSUs that are cash rich, even if you allow for capex, and have 50% of cash on their balance sheets to buy stakes in other PSUs or buy their stakes back from the Government from India, which holds over 70% in all of these PSUs.

The names proposed include Coal India , Oil India , ONGC , NTPC , NMDC and SAIL.

However, one point the cabinet note does not specify is what percentage of buyback or crossholdings will be done. It instead talks about it as a broad policy decision because currently the disinvestment policy is to encourage retail participation and to allow for public ownership of PSUs.

Only last year the government went in for a Coal India initial public offer and then the year after to go in for a buyback is a contradiction in sorts. So it remains to be seen whether the cabinet will actually go ahead with this, but the inter-ministerial consultations on this are on.


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