Up to 50% dividend likely from these 7 cash-rich PSUs; govt to get Rs 21,000 cr

Coal India, Hindustan Aeronautics, NMDC, RITES, Engineers India, NBCC and MOIL are among the top seven candidates that may utilise 50 per cent of their FY18 cash and bank balance to pay dividends to help the government tide over revenue shortfall.

Brokerage Axis Securities estimates that these company had a cumulative cash balance of Rs 54,235 crore at the end of March 2018 with net debt of Rs 2,943 crore. The government can mop up around Rs 21,097 crore from these cash-rich firms through dividends.

The government had set a fiscal deficit target of Rs 6.24 lakh crore or 3.3 per cent of GDP for the ongoing financial year. But given the current financial trends, the deficit target is likely to be breached.

There is a high probability that the government would now push these cash-rich PSUs to pay higher dividends and/or to buy back shares using their cash reserves and help it meet its deficit goals.

Several PSUs like NMDC, NHPC, Oil India, BHEL, NALCO, NLC, Cochin Shipyard, KIOCL and ONGC have already announced share buybacks. IOC recently announced (December end) an interim dividend. On the day of the announcement, the stock traded at a dividend yield of 5 per cent.

Coal India and RITES have also announced interim dividends and their final dividend could be higher than historical dividend yields, Axis Securities said.