Government looks to tap idle cash of PSUs

NEW DELHI: The government has begun a mega exercise to get public sector companies to buy back their shares and take a slice of the estimated Rs 2.6 lakh crore lying idle with them. Although the move is meant for the government to raise more resources, one of the objectives is to get state-run companies, including unlisted ones, to leverage their balance sheets better and raise more loans from the market.

While a list of companies is being prepared based on their capital expenditure plans, sources said the focus is on companies which are just sitting on a cash pile. In addition, companies which have high cash and low debt are the other focus area. “Some of our PSUs have traditio nally been conservative and have not relied much on market borrowings. But, greater market borrowings also increase scrutiny , which is often desirable,“ said an officer.

The initial focus of the buyback exercise was to meet the shortfall from lower disinvestment during the current financial year. But it has now got bigger and is part of a larger government strategy .For a buyback, companies with surplus cash would dip into their reserves, repurchase the shares and transfer the money to the shareholders, led by the government.

While this 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. The move is expected to be especially helpful in case of companies which are currently unlisted and may go for a listing later.

Sources said the exercise was being driven by the department of disinvestment, which has now been tasked with public asset management, along with the depart ment of public enterprises. It is not clear how the government intends to deal with companies in the oil and metals space, which are grappling with low international prices.

Already , the disinvestment department has got the ministry of corporate affairs (MCA) to clarify some of the rules for buyback and some inter-ministerial group meetings have also been held. For instance, MCA has amended the rules to allow buybacks on the basis of unaudited accounts for up to six months through a limited review by auditors. Earlier, it had issued a clarification on the debtequity ratio after a buyback.

In the past, too, the government had toyed with the idea, including getting Sebi to amend some of the rules, but made little progress.