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  3. Government targets unlisted PSUs to mop up Rs 5,000 crore

Government targets unlisted PSUs to mop up Rs 5,000 crore

28 Mar 2016 Evaluate

In order to meet the revised disinvestment target of Rs 25,300 crore, the government is targeting to raise around Rs 5,000 crore over the last few days of the current fiscal year with unlisted public sector companies such as Hindustan Aeronautics and Ireda agreeing to buy back the Centre's shares by dipping into the surplus cash at their disposal. 

As the buyback of shares in listed entities will take longer the government is looking at unlisted companies to help it meet the target this year. The move is expected to be especially helpful for companies such as HAL, which are currently unlisted and may go for a listing later.

In a buyback, companies with surplus cash use their reserves, repurchase the shares and transfer the money to the shareholders, which in this case will be the government. While will help the government raise resources; it will also help the PSUs improve the earning per share as the number of shares will come down.

For the current financial year, the government had budgeted for record disinvestment of Rs 69,500 crore, but had to lower its ambitious target in the wake of poor market conditions and its inability to push through strategic sale. But even that target is looking tough, prompting the government to rush ahead with other options to raise resources, including buyback and special dividend. As a result last week, HAL board cleared the buyback plan, while Ireda has been asked to opt for the same route or pay special dividend.


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