'Cabinet nod may not be required for PSU share buyback'

Cabinet approval may not be required for the finance ministry to go ahead with its plan of PSU disinvestment through buyback and private placement mode, a top official said.

As the public sector undertakings (PSUs) are guided by the Companies Law, sources said they can buyback their shares after approval of the board.

"We may not need fresh Cabinet approval for selling stake in PSUs through buyback and private placement as the Company Law, under which PSUs are governed, approves buyback" a senior finance ministry official said.

The finance ministry had earlier floated a Cabinet note seeking responses of administrative ministries by allowing buyback and private placement mode for disinvestment.

Since the beginning of the disinvestment programme, the government has divested stake in PSUs either through initial public offers (IPOs) or follow on public offers (FPOs).

"For the companies for which the government already has Cabinet approval for disinvestment, we do not need fresh nod. We will go ahead with ONGC stake sale once there is clarity on Sebi guidelines on the revised buyback and institutional placement norms," the official said.

Market regulator Securities and Exchange Board of India (Sebi) has earlier this month relaxed norms for buyback of shares and dilution of equity by companies.

The new norms would help the companies to complete the process of selling shares within days against the normal process which can take months, a move that will facilitate offloading of government shares in central PSUs.

Besides reducing the timeline for completion of buyback of shares by companies to 34-44 days, it has also introduced a new mechanism called Institutional Placement Programme (IPP)-- that would allow promoters to sell up to 10 per cent of their capital through an auction.

The DoD is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal. Till date it has been able to raise only Rs 1,145 crore from PFC.

In order to fast track the disinvestment programme, the DoD had sought opinion of concerned ministries for buyback of shares and prepared a list of cash-rich PSUs in this regard.

Several ministries like oil, power, steel, coal and mines are believed to have opposed the proposal saying it could impact the business expansion plans of the PSUs.