Family silver: PSU buyback spree to begin with Coal India; govt looks to raise Rs 12,000 crore this fiscal

With a big shortfall in indirect tax revenue — the collections in April-November were hardly 2% higher than the year-ago period versus FY19 growth estimate of 22% — the Centre has asked a clutch of central PSUs to speed up their planned share buybacks, a mechanism via which it wants to net upwards of Rs 12,000 crore this fiscal.

While the board of Coal India (CIL) will meet on February 4 to decide on buyback, other PSUs to undertake buyback before the fiscal-end include ONGC, Indian Oil and Oil India.

NLC, Cochin Shipyard, Bhel, NHPC, Nalco and KIOCL have already done buyback this year.

The boards of three CIL subsidiaries—Mahanadi Coalfields, Northern Coalfields and South Eastern Coalfields—approved buying back their shares in the parent on Tuesday. The total amount that will accrue to CIL from this exercise is Rs 1,065 crore; it will likely use this amount and could possibly also use a small part of its cash surplus to buy back its shares from the government and other stakeholders. In a stock market filing on Wednesday, CIL said: “A board meeting is scheduled on Monday to consider and approve buyback of the fully-paid equity shares of the company having a face value of Rs 10 each.” The trading window of the stock will remain closed from January 30 to February 6, 2019.

Against this year’s disinvestment target of Rs 80,000 crore, the government has been able to raise Rs 35,500 crore so far, of which 77% has come from exchange-traded funds.

While about Rs 15,000 crore is assured from the proposed Power Finance Corporation’s proposed purchase of the Centre’s 52.63% stake in Rural Electrification Corporation, share buybacks could fetch a minimum of Rs 12,000 crore, which can go up to Rs 20,000 crore in case other shareholders do not participate.

Another Rs 5,000 crore is expected from relatively smaller deals such as sale of Centre’s entire stake in Pawan Hans (worth about Rs 1,000 crore) and Dredging Corporation of India (up to Rs 1,000 crore); listings of North Eastern Electric Power Corporation (which may fetch about Rs 1,300 crore) and MSTC are also on the cards.

Achieving the disinvestment target would be key to the government keeping FY19 fiscal deficit at the budgeted level of 3.3%. A moderate expenditure cut is also likely. Last year, the Centre’s disinvestment receipts stood at a record Rs 1 lakh crore, including Rs 36,915 crore from sale of its 51% stake in HPCL to ONGC.The Centre may also sell its 63.79% in hydro power producer SJVN to NTPC this year. This could fetch Rs 6,600 crore plus a premium. The Himachal Pradesh government, which owns a 26.85% interest in the firm and will retain its stake, has sought assurance that the state’s interest would be protected.

A robust pipeline of OFSs in PSUs such as GIC Re, New India Assurance, BEL, HUDCO, NBCC, is also an option available with the government.