Government wants cash-rich PSUs like Coal India, Oil India and NTPC to take a cue from the private sector and use surplus cash to buy back shares and improve balance sheets.
“Major private sector companies have a treasury wing to make use of their cash balance more effectively. PSUs have so far not been able to manage their cash balance efficiently. DIPAM will endeavour to help PSUs to utilise their cash balance for resource augmentation,” an official said.
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“Private companies have been using buy-back as a strategy of investment management. They assess ways to increase resources and at the same time how best to maximise returns to equity shareholders,” the official added.
With public sector companies sitting on an estimated cash pile of Rs 2.6 lakh crore, leveraging surplus cash would be the best option for them rather than going for disinvestment.
“If you are having huge cash balance, is it advisable to divest promoter holding or leverage the cash first? If the return on cash balance is not more than bank rate then there is no reason for holding huge cash. The PSUs should take professional views on balance sheets,” the official said.
Buy-back helps a company to reduce equity by using idle cash and hence provide better returns to the shareholders.
At the end of March 2015, NMDC had a cash and bank balance of Rs 18,443 crore, Coal India had Rs 53,093 crore, NTPC (Rs 13,000 crore), Nalco (Rs 4,628 crore) and MOIL (Rs 2,830 crore). Latest cash balance with OIL is Rs 9,000 crore.
While renaming the Department of Disinvestment as Department of Investment and Public Asset Management (DIPAM) in Budget, Finance Minister Arun Jaitley said it “will adopt a comprehensive approach for efficient management of the government investment in CPSEs by addressing issues such as capital restructuring, dividend, bonus shares”.
Post this, DIPAM has helped the exchequer garner Rs 4,500 crore through buy-back of shares by Hindustan Aeronautics Ltd and Bharat Dynamics Ltd in March. While HAL had cash balance of Rs 17,671 crore, BDL’s stood at Rs 3,669 crore.