Government allows PSU share buy-back; ONGC stock auction disappoints

The union cabinet today approved buy-back of shares by cash-rich public sector undertakings (PSUs), opening another front for sale of government equity in state-run firms.

The new arrangement will help the government raise money from sale of equity stake in state-run firms at a time when the market is far from ready for a rush of primary equity issues.

Under the new mechanism, PSUs can buy back their own shares from the holders (in this case the government) like listed companies buy back their shares from the market.

This decision, which will work as an alternate route for the government to offload its holdings in PSUs, comes after the government announced the sale of 5 per cent equity in Oil and Natural Gas Corporation Ltd (ONGC).

The one-day auction sale of ONGC stock gained momentum in the afternoon with total bids for about 13.5 million shares, mostly in the 290-293 per share range and the volume was still far away from the total offer size of 427.7 million shares.

The auction commenced at 9.15 am and bids will close at 3.30 pm today.