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  #1  
Old 21st October 2018, 11:48 AM
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Default PSU Buybacks - What is Happening?



https://economictimes.indiatimes.com...w/66236475.cms

I understand why private companies buyback stock. If a company doesn't have anything to spend money on, it's better to buy back stock & retire it - so that for the remaining owners, their ownership of the company goes up.

Dividends are taxed, so buybacks are another way of giving money to stockholders.

But for a PSU, I don't understand what is the point of this?

First is the PSU going to buybuck the shares & retire them or not?

Since govt is a big owner, will govt sell of it's own shares to the PSU during the buyback or not?

If Govt sells in a lesser proportion than the non-govt owners, then Govt's ownership of the PSU increases - I mean that's the reverse of disinvestment, right?

So what exactly is happening here?
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  #2  
Old 24th October 2018, 01:08 PM
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Quote:
Originally Posted by vinvest View Post
First is the PSU going to buybuck the shares & retire them or not?

Since govt is a big owner, will govt sell of it's own shares to the PSU during the buyback or not?

If Govt sells in a lesser proportion than the non-govt owners, then Govt's ownership of the PSU increases - I mean that's the reverse of disinvestment, right?

So what exactly is happening here?
The buyback process is same for PSU and private companies - shares are retired in both cases.

The primary aim in most PSU buybacks is to give cash to government to meet its fiscal needs.

Government will try and offer as many shares as it can in the buyback and so there is no question of reduction of government shareholding.
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Old 24th October 2018, 01:27 PM
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Originally Posted by Alchemist View Post
The buyback process is same for PSU and private companies - shares are retired in both cases.

The primary aim in most PSU buybacks is to give cash to government to meet its fiscal needs.

Government will try and offer as many shares as it can in the buyback and so there is no question of reduction of government shareholding.

Why can't the govt just sell their shares in the open market instead of going this route?
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Old 30th October 2018, 11:12 PM
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Quote:
Originally Posted by vinvest View Post
Why can't the govt just sell their shares in the open market instead of going this route?
It dampens share price.
It increases liquidity and may therefore reduce demand for future disinvestment.
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