NHPC buyback to kick off govt's backdoor disinvestment

The government is pulling out all the stops to make the red lines drawn on fiscal and current account deficits work.

NHPC's buyback plan is a move in this direction.

Only three weeks back had the government deferred a plan to sell 11 percent stake in the state-run hydropower producer, citing bad market conditions.

Image: ibnlive

Image: ibnlive

Now, the company has come out with a Rs 1,600 crore buyback plan, which, according to a PTI report citing source, is aimed at improving the value of company's share in the market.

This is a sort of backdoor divestment as the government will also get a chance to tender its shares to the company.

With market conditions unlikely to improve in the near future, it will be difficult for the government to meet its Rs 40,000 crore disinvestment target for the year, a Reuters report said yesterday.

"In the current situation, we cannot go to the market. We may have to wait for some more time before the market stabilises," a finance ministry official was quoted as saying in the report.

The government's ability to rein in the fiscal deficit at the targeted 4.8 percent of GDP this year hinges on its disinvestment programme.

An earlier report in the Economic Times had said the government is likely to ask cash rich PSUs such as Coal India, NHPC and NMDC to buy back shares to help it meet its divestment target.

"We keep on pressing these ideas with the administrative ministry and are in dialogue with them to help them understand the concept of buyback. The reluctance is there because no one has tried it so far," disinvestment secretary Ravi Mathur has been quoted as saying in the report.

With NHPC buyback, the government will kick off its divestment through the backdoor.

Updated Date: Dec 21, 2014 03:21 AM

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