Within days of government bringing out a detailed buyback policy for PSUs, NMDC and MOIL on Tuesday announced plans to buy back shares from the market that could fetch the government about `6,500 crore in disinvestment revenue.
“The companies will buy back shares worth 25% of their paid-up capital and free reserves,” a senior government official said.
The government owns 80% each in both the mining companies. At March-end 2016, NMDC’s cash and bank balances stood at `14,809 crore while it was `2,850 crore for MOIL.
The NMDC buyback is expected to fetch about `5,700 crore to the government while it could get about `800 crore from MOIL buyback. Both the companies on Tuesday informed the stock exchanges that they will seek their respective board’s approval for the buybacks on June 7.
The dates of buyback, in which public shareholders can also sell back their shares to the company, will be announced after the board meeting.
NMDC stock closed 1.66% up at 91.65 while MOIL’s closed 1.42% higher at `243.1 on the BSE on Tuesday.
Nearly two dozen central PSUs, including Coal India, NMDC and Nalco, will have to initiate steps to buy back a portion of their shares from the government in FY17, after the Department of Investment and Public Asset Management issued comprehensive guidelines on May 31 on capital restructuring of the CPSEs by way of buyback, dividends, issue of bonus shares and splitting of shares.
The CPSE buyback of shares could be of significant help to the Centre to achieve the `36,000-crore revenue target set from minority stake sales in CPSEs in the current fiscal. It would raise another `20,500 crore from strategic stake sales in them.
CPSEs having surplus cash will no longer be able to park funds in fixed deposits in banks, which officials said generated a very poor post-tax return of 4-5%.
As per the buyback policy, every PSU having net worth of at least `2,000 crore and cash and bank balance of over `1,000 crore will have to buy back their shares.
In March, the government raised about `4,500 crore by selling a portion of its holding in unlisted Hindustan Aeronautics (HAL) and Bharat Dynamics back to these companies.
This helped it collect `32,149 crore in disinvestment revenue as against the revised target of `25,300 crore for FY16.