Bid to boost available capital in the Defence PSU
Could generate Rs. 2,000 crore or $300 million for the govt
New Delhi: The Narendra Modi government is mulling the buy back of up to 25 per cent of its paid up equity capital from Defence Public Sector Undertaking Bharat Electronics Limited (BEL), in a bid to boost its available capital.
Only earlier this week, the government had approved a similar proposal to buy back 1.72 per cent of the capital from the public sector Coal India Limited.
Depending on the time and price of the issue, a buyback of BEL shares could generate nearly Rs. 2,000 crore ($300 million) for the government, the Indian Express reported, quoting unnamed sources from the Finance Ministry.
With nearly half-a-dozen PSU companies lining up buyback of their shares, the government expects to generate over Rs 12,000 crore ($1.8 billion) through this process from state-owned National Aluminium Company, National Mineral Development Corporation and Manganese Ore India Limited, it said.
The Department of Investment and Public Assets Management (DIPAM) had in May this year directed every PSU having net worth of at least Rs. 2,000 crore and cash and bank balance of over Rs 1,000 crore to buy back their shares; announced to improve capital availability with the PSUs.
The buyback of shares will be of significant help the Modi government in achieving its budget target of Rs. 36,000-crore ($5.5 billion) from minority stake sales in 2016-17. The finance ministry expects to raise another Rs. 20,500 crore ($3 billion) from strategic stake sales.
BEL shares closed at Rs. 1,254.55, down 1.62 per cent, at the Bombay Stock Exchange on July 15. The government currently holds 75.02 per cent stake in BEL, which operates mainly in the defence sector and earned Rs. 1,358 crore of net profit on a turnover of Rs 7522 crore in 2015-16, the report said.