The Centre’s bid to boost its non-debt capital receipts by pushing the cash-rich central PSUs to buyback their own shares has impacted the credit profile of these firms. S&P Global Ratings said on Tuesday that corporate activities that are designed to support the government coffers by PSUs are ‘credit negative’ for such entities.
In the past three months, 10 PSUs have announced or executed buybacks for a cumulative amount of Rs 15,000 crore, which will count toward the government’s target of Rs 80,000 crore from disinvestment of state-owned entities. In fact, the PSUs are also being made to invest in the government’s assorted schemes and programmes. As per S&P, the credit impact on the respective companies can vary depending on the size of cash outflow.
“Extracting cash from SOEs (PSUs) decreases their financial flexibility in a stress scenario, which — at least over the short term — is credit negative at the firm level,” S&P said. “While we await the final acquisition cost, PFC’s leveraged buyout of the government’s 52per cent shareholding in REC led us to place the rating on CreditWatch with negative implications,” it said. —FE with PTI