The Finance Ministry has prepared a tentative list of 11 central public sector enterprises (CPSEs) that will conduct a share buyback during the ongoing financial year. The Department of Investment and Public Asset Management prepared the list after discussing the proposal with these 11 companies from sector ranging from power production to aeronautics.
The list of 11 CPSEs compiled by the government include Coal India, NTPC, NALCO, NMDC, NLC, BHEL, NHPC, NBCC, SJVN, KIOCL and Hindustan Aeronautics. The shortlisted companies have been asked to buyback the shares in accordance to the capital restructuring guidelines laid out by the Department of Investment and Public Asset Management on May 27, 2016
The guidelines set by the Department mandate that companies worth Rs 2,000 crore, and cash and bank balance more than Rs 1,000 crore have to mandatorily buy back shares. Officials however said that not all CPSEs shortlisted by the Finance Ministry will be able to buyback the shares during the financial year 2018-19 on account of their business plans, according to a PTI report.
The Department had also asked every CPSE to analyse cash and bank balance, expansion plans, borrowing plans, net worth and market value of shares in the first board meeting after the closure of a financial year. The companies have also been asked to explore options for buying back of shares.
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. Buying back stock is also a route to make a business look more attractive to investors. By reducing the number of outstanding shares, a company's earnings per share ratio is automatically increased.
Edited by Vivek Punj with PTI inputs