Disinvestment: GAIL to follow suit, announce share buyback soon

• GAIL is going to place a proposal before its Board of Directors for share buyback in the range of Rs 120-130 per share

• At the end of FY20, GAIL's reserves and surplus stood at Rs 37,500 crore

New Delhi: In order to shore up the government's disinvestment proceeds, state-run GAIL (India) Limited is soon going to announce a share buyback, said sources. GAIL is going to place a proposal before its Board of Directors for share buyback in the range of Rs 120-130 per share, which would be at a premium of 20 to 30 percent. At the end of FY20, GAIL's reserves and surplus stood at Rs 37,500 crore. The net cash at the end of the September quarter was Rs 3,000 crore. 

GAIL financial performance highlights

GAIL (India) Limited posted a 13 percent increase in turnover in Q2FY21 at Rs 13,611 crore as opposed to Rs 12,060 crore in Q1FY21. Profit before Tax (PBT) increased to Rs 1,551 crore in Q2 as against Rs 356 crore in Q1FY21. The Profit after Tax (PAT) rose to Rs 1,239 crore in Q2 as opposed to Rs 256 crore in Q1FY21. GAIL Chairman and Managing Director Manoj Jain said that the company's plants and pipelines have achieved pre-COVID level of performance in a press interaction held after the Q2 results were declared.

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The backdrop

The news comes shortly after NTPC, EIL, KIOCL announced a share buyback. The government is believed to have reached out to Coal India Ltd, NMDC Ltd, MOIL Ltd, and Engineers India Ltd (EIL) for share buybacks this year. The government is the largest shareholder in all these companies and is looking to sell off its equity for cash in return. The Department of Investment and Public Asset Management (DIPAM) has managed to raise just about 3 percent of its FY21 target of Rs 2.1 lakh crore so far. With tax revenues hitting a new low in the wake of the COVID-19 pandemic, the fiscal gap is likely to rise to more than double the target of 3.5 percent of the Gross Domestic Product (GDP). DIPAM Secretary Tuhin Kanta Pandey had said in a recent interview that the Centre is encouraging PSUs to announce share buybacks if they have extra cash available after meeting their capex requirements.

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