Government plans buybacks, OFS in PSUs to meet FY23 disinvestment target: Report

The government is planning buybacks and offer-for-sale (OFS) of central public sector enterprises (PSUs) in the quest to meet the current year’s disinvestment target, according to a report by business daily Mint.

The move comes as uncertain market conditions and legal hurdles pose challenges to ongoing privatization transactions. All ongoing strategic transactions will spill over to the next financial year and so for some OFS, buybacks can be considered where minimum public shareholding norms can be met, according to a senior official quoted in the report.

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The current year’s disinvestment proceeds have exceeded Rs 31,000 crore but remain below the revised target of Rs 50,000 crore. This target was lowered from the Rs 65,000 crore set in the budget last year.

The gap is unlikely to narrow by strategic disinvestments or the sale of all or 50 percent or more of government shares in central PSUs, along with the transfer of management control, according to the report.

The sale of Bharat Petroleum had to be put on hold due to volatile crude prices and the global shift towards green energy. The demergers of Shipping Corp. of India and BEML caused delays in the sale process of the core assets.

OFS allows the existing company shareholders to sell their shares to public through an exchange in a fair and transparent manner, while buybacks allow a company to re-purchase its shares from shareholders. Buybacks are more feasible as the government received Rs 497 crore from only one instance of share buyback by GAIL (India) Ltd last year.

The government’s plan to sell its residual 29.5 percent stake in Hindustan Zinc Ltd in tranches of about 5-10 percent, is also unlikely to happen in the near term due to uncertainties. Notably, Vedanta Resources holds a 64.9 percent stake in Hindustan Zinc.

The company’s board approved the purchase of Vedanta’s global zinc assets for around $2.9 billion, but the move faced opposition from government officials of the mines ministry, who are part of the board.

The government is set to object to Vedanta’s buyout of its global zinc assets in the next shareholders’ meeting, where it will highlight concerns about the transaction’s related-party nature, the report added.