New Delhi: Coal India, Hindustan Aeronautics Ltd (HAL), NMDC, RITES, Engineers India, NBCC and MOIL are among the top public sector undertakings (PSUs) that may use up 50 percent of their cash and bank balance accumulated over the last year to pay dividends to assist the government control revenue shortfall.
These cash-rich entities had a cumulative cash balance of Rs 54,235 crore at the end of March last year with net debt of Rs 2,943 crore, according to Brokerage Axis Securities.The dividends collected can help the government mop up around Rs 21,097 crore. With a fiscal deficit target of Rs 6.24 lakh crore or 3.3 percent of GDP set for the ongoing financial year, it is unlikely that the government will reach its target. The government might likely press these cash-rich firms into paying a higher dividend or to buy back shares using their cash reserves to reach its deficit target.
PSUs like NMDC, NHPC, Oil India, BHEL, NALCO, NLC, Cochin Shipyard, KIOCL and ONGC have already announced share buybacks, while IOC recently announced an interim dividend. Additionally, the stock traded at a dividend yield of 5 per cent on the day of the announcement. With Coal India and RITES announcing interim dividends, their final dividends could be higher than historical dividend yields, Axis Securities said.