Disinvestment: KIOCL comes to govt’s aid, announces share buyback; more PSUs to follow

New Delhi: Amid uncertainty clouding the Centre's big disinvestment plans for the year, the government is now looking to public sector undertakings (PSUs) to cushion its disinvestment proceeds through share buyback — KIOCL is the first PSU on this list. In a regulatory filing to the stock exchanges on Wednesday, KIOCL Limited, a Miniratna PSU under the Ministry of Steel, announced a share buyback at a price of Rs110 for an aggregate consideration not exceeding Rs 155.92 crore. The news comes after the Board of Directors of the company approved the proposal for share buyback on October 19. "The board approved a buyback not exceeding 1,41 crore shares, representing 2.28 per cent of the total number of fully paid-up equity shares in the paid-up share capital of the company, at a price of Rs 110 for an aggregate consideration not exceeding Rs 155.92 crore," the regulatory filing said.

"The board of directors of KIOCL Limited passed 4 resolution on October 19, 2020 to approve the proposal of buyback of fully paid-up equity shares of face value of Rs 10 each ("Shares" or "Equity Shares") of the Company not exceeding 1,41,74,469… at a price of Rs 110 per Equity Share payable in cash, for an aggregate maximum consideration not exceeding Rs 155.92 Crores, excluding the transaction costs…" the notification released by KIOCL in this regard said.

The company has fixed October 30, as the record date for the purpose of ascertaining the eligibility of shareholders for buyback of equity shares.

Currently, the Centre holds 99.1 percent share of the KIOCL Limited. The rest 0.99 percent shares rest with other institutions and the public.

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Govt encouraging cash-rich PSUs to announce share buybacks

The news comes as the government is believed to have reached out to Coal India Ltd, NTPC 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 an interview last week 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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