Share buyback: Govt receives Rs 4,500 crore from HAL, Bharat Dynamics

“The buyback in HAL and Bharat Dynamics has been done. It will help raise around Rs 4,500 crore and we will inch closer to the disinvestment target of Rs 25,312 crore for FY16,” a senior finance ministry official said.

In January, the government had asked cash-rich public sector companies to consider the buyback option or pay higher dividends to help meet the shortfall in revenues.

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Cash-rich companies use their reserves to repurchase shares in a buyback and the government being one of the shareholders, benefits from the transfer buyback. The buyback move will also help the public sector companies to improve their earnings per share as the number of shares will come down. Officials said buybacks in some other cash-rich public sector companies will also be considered in next financial year.

The government opted for the buyback route for unlisted public sector companies, after having sharply lowered its disinvestment target for 2015-16 to Rs 25,312 crore as against the initial total target of Rs 69,500 crore, which included Rs 28,500 from strategic sale.

After consistently falling short of disinvestment targets over the last six years, the government set its estimate from minority stake sale at only Rs 10,688 higher for 2016-17 than the revised estimates for this financial year.

The target for disinvestment for 2016-17 has been set at Rs 56,500 crore, out of which Rs 36,000 crore is estimated to be raised from minority stake sale in public sector companies, while Rs 20,500 is estimated to be raised from strategic sale.

In 2015-16, the government had so far raised Rs 19,514 crore from stake sale in seven PSUs including Rural Electrification Corporation Limited, Power Finance Corporation Limited, Dredging Corporation India Limited, Indian Oil Corporation Limited, Engineers India Limited, NTPC and CONCOR.