DIPAM devising matrix to monitor cash utilisation by PSUs

The Department of Investment and Public Asset Management has devised detailed parameters to monitor the performance of state-owned companies for ensuring optimal utilisation of cash and free reserves, estimated at Rs 2.6 lakh crore.

The government, as an investor, will expand its focus from disinvestment and work for improving the financial and physical performance of PSUs, a top official told PTI.

In case PSUs are unable to utilise their surplus cash, government would nudge them to buy back shares using free reserves, the official said.

In order to evaluate the performance of PSUs, government has evolved 10 parameters which include capacity utilisation, leveraging networth, return on investment, technology upgradation and marketing efficiency.

"The idea behind the exercise is to ensure that cash does not remain idle and is utilised optimally by PSUs who have high networth and negligible or zero leverage ratio and whose expansion of business does not justify holding so much cash," the official said.

While the private sector companies utilise cash for acquisition or capital expenditure, the PSUs have a trend of holding on the cash and bank and hence their balance sheets needed to be looked at professionally, the official added.

To assess the cash utilisation of PSUs, the government starting this fiscal will also look at ratios like-- return on networth, dividend to networth, Profit after tax to networth.

"If the return on cash balance is not more than bank rate then there is no reason for holding huge cash... Large cash was lying in bank and government was divesting equity.

Government is now looking at the point of view of return, premium to efficiency in business operation and expansion of business, including capex," the official said.

While renaming the Department of Disinvestment as DIPAM is Budget, Finance Minister Arun Jaitley had said that the department "will adopt a comprehensive approach for efficient management of the government investment in CPSEs by addressing issued such as capital restructuring, dividend, bonus shares." Post this, DIPAM has helped exchequer garner Rs 4,500 crore through buy back of shares by cash rich Hindustan Aeronautics and Bharat Dynamincs last month. While HAL had cash balance of Rs 17,671 crore, BDL's stood at Rs 3,669 crore.

"CPSEs have been advised to professionally examine their financials. It is for first time that PSUs are taking a professional view on their balance sheet and preferring to restructure the capital to get rid of surplus funds," the official added.

The focus of the government is now on monitoring PSU performance and capital restructuring so that promoters can leverage cash first before divesting equity, he said.