Traders at the trading floor of Motilal Oswal Financial Services Ltd. (Photographer: Vivek Prakash/Bloomberg)

Finance Ministry Shortlists 11 State-Run Firms For Share Buyback

The Finance Ministry has shortlisted 11 central public sector enterprises, including Coal India Ltd., NTPC Ltd., National Aluminium Company Ltd. and NMDC Ltd., for a possible buyback of shares in the ongoing financial year.

The other companies on the list include NLC India Ltd., Bharat Heavy Electricals Ltd., NHPC Ltd., NBCC (India) Ltd., SJVN Ltd., KIOCL Ltd. and Hindustan Aeronautics Ltd., officials said.

Earlier this week, the Department of Investment and Public Asset Management discussed the buyback option with these companies, following which the list was drafted. These CPSEs have been asked to buy back the shares following capital restructuring guidelines set by the department on May 27, 2016.

Officials, however, said that in the view of the business plans of the entities, not all on the list would be able to buy back the shares in 2018-19.

As per guidelines set by the department, public sector companies with a net worth of at least Rs 2,000 crore, along with a cash and bank balance of over Rs 1,000 crore, have to compulsorily opt for a share buyback scheme.

It had also asked each state-run firm to analyse cash and bank balance, expansion plans, borrowing plans, net worth, market value of shares and explore share buyback option in their first board meeting after the closure of a financial year.

Share buybacks offer a route for companies to return some wealth to their shareholders, while potentially boosting their stock prices. In a share buyback, a company will absorb or retire the repurchased shares, and rename them treasury stock.