FinMin asks PSUs to buy back shares, pay higher dividends

Govt has mobilised just Rs 13,330 cr against budgeted target of Rs 69,500 cr from PSU stake sales

Government has asked public sector firms to buyback shares worth about Rs 25,000 crore and pay additional dividend on top of the mandated 30% as it looks to rescue disinvestment programme that is on the brink of missing target for the sixth year in a row.

With just 45 days left for the fiscal to end, the government mobilised just Rs 13,330 crore from sale of stake in PSUs as against the budgeted target of Rs 69,500 crore.

As an alternative to selling stake through public offers, it has asked cash-rich Coal India Ltd, National Aluminium Co Ltd (NALCO), NMDC Ltd and MOIL Ltd among half a dozen PSUs to buy back shares, officials involved in the discussions said.

The firms identified for the share buyback have a cumulative cash balance of over Rs 78,000 crore.

Officials said NALCO has been asked to consider buying back 25% shares while world's largest coal producer CIL has been asked to consider 10% buyback.

As per the original plan, the Government was to divest 10% stake each in Coal India and NALCO.

A 10% share buyback has also been proposed in case of MOIL, NMDC and India Renewable Energy Development Agency Ltd among others, they said.

At the end of March 2015, NMDC sat on a cash and bank balance of Rs 18,443 crore, Coal India had Rs 53,093 crore, Nalco (Rs 4,628 crore) and MOIL (Rs 2,830 crore).

While Nalco would have to shell out Rs 2,023 crore for the share buy back, for a 10% buy back NMDC would have to cough up Rs 3,120 crore.

Besides, Coal India would have to spend Rs 19,170 crore for a 10% share buy back, the same for MOIL would be Rs 309 crore.

The share buyback is being proposed as disinvestment target looks set to be missed for the sixth consecutive year and 16th time since the stake sale began in early 1990s.

Although, since the beginning of the year the disinvestment department had lined up about two dozen PSUs for stake sale and putting in place Cabinet approvals for launching the stake sale, but the equity markets played truant and delayed the stake sale plans.

It has so far been able to sell stake in 5 PSUs -- Rural Electrification Corp (Rs 1,608 crore), Power Finance Corp (Rs 1,671 crore), Dredging Corp of India Ltd (Rs 53.33 crore), Indian Oil Corp (Rs 9,369 crore) and Engineers India Ltd ( Rs 640 crore).

Officials said the Finance Ministry has asked profit making PSUs to pay more dividend than the mandated 30% of net profit or 30% of government's equity holding, whichever is higher.

Cash-rich PSUs like Coal India have also been asked to issue bonus shares.

"We have been asked to pay as much dividends as we can," said an official with a PSU.

So far the big PSUs like ONGC, IOC, Oil India, GAIL, BPCL, HPCL and NTPC have paid about Rs 5,763 crore in interim dividend for 2015-16 fiscal. Coal India is yet to declare dividend.