Mumbai: State-run National Aluminium Co. Ltd (Nalco) has decided to buy back 644.3 million shares or 25% of the paid-up capital from public shareholders, the company said in a stock exchange filing on Wednesday.
The share buy back will help the government raise funds and reduce the fiscal deficit for 2016-17.
The company has fixed the buy back price at ₹ 44 per share and now awaits the approval from public shareholders who hold 19.07% stake in the company.
Nalco had ₹ 5,369.36 crore of cash and cash equivalent as of 30 September 2015, Bloomberg data showed.
The government may garner a minimum of ₹ 2,294.33 crore in proportion to its 80.93% stake in the state-owned aluminium maker.
“The Board of Directors noted the intention of the Promoter of the Company to participate in the proposed buy back," the company said.
As per share buy back rules of Securities and Exchange Board of India, a company will have to buy back through “tender route" to enable the promoter (the government in this case) to participate in the buy back.
Moreover, for a buy back of up to 25% of the paid-up capital, the company will be required to seek shareholder approval.
Nalco shares closed at ₹ 43.05 apiece, up 1.65% from previous close. The stock has touched a high of ₹ 49.60 and low of ₹ 28 in the past 52 weeks.
Mint reported on 16 May that 34 central public sector enterprises (CPSEs) hold about ₹ 1.8 trillion in cash and equivalents—a cash pile that may come in handy as finance minister Arun Jaitley outlined the government’s disinvestment strategy which would include share buy backs by cash-rich public sector units, followed by strategic sale once the market improves.
Coal India Ltd (CIL), world’s largest coal-producing company, had more than ₹ 53,000 crore in cash as of year-ending March 2015. The final audited financial results of fiscal year 2016 are still awaited.
A 10% stock buy back in CIL at current market price could fetch the government over ₹ 14,100 crore if it tenders shares in proportion to its 79.65% stake in CIL.
The Centre aims to raise ₹ 56,500 crore by selling stakes in state-owned enterprises in 2016-17, of which ₹ 36,000 crore will come from minority stake sales and ₹ 20,500 crore from strategic stake sales.
The share buy back option was used in November 2013 when the government was unable to sell 11.36% stake in the state-owned hydel power producer NHPC Ltd. The government garnered about ₹ 2,100 crore from the repurchase.