InvestorQ : There have been rumours in the market that IOCL plans to buy back shares. Is that true?
Niti Shenoi made post

There have been rumours in the market that IOCL plans to buy back shares. Is that true?

ishika Banerjee answered.
2 years ago

It is hard to comment on rumours but to the best of my knowledge, IOCL has denied these expectations. In fact, IOCL reiterated that it has no plans to buy back shares as of now but would only consider if there is a mandate. Currently, the government has been asking cash rich PSUs to buy back shares from the government to help in the divestment targets.

The government surely has a problem on hand as it chases a record Rs.210,000 crore from disinvestment proceeds. Since IOCL is also a cash rich PSU, the normal assumption is that they may also be called upon to chip in. However, the CEO of IOCL, Mr. Gupta, has clarified that IOCL has not been asked by the government to deliver a buyback bonanza.

There is another argument to this. Currently, the government owns just about 51.5% stake in IOCL. Since the government would be keen to retain 51% controlling stake in these PSUs, there is no scope for further dilution. At least appears to be the line of argument that IOCL is offering.

Some of the cash rich PSUs in the government target list are Coal India Ltd, NTPC, NMDC, MOIL, KIOCL and Engineers India. In all these cases, the government being the largest shareholder will benefit by tendering the equity it holds in return for cash. This will also facilitate the government to lay its hands on the Rs.40,000 crore cash pile with PSUs.

IOCL had announced stellar results in the Sep-20 quarter on the back of positive oil prices, better inventory valuations and improved gross refining margins or GRMs. IOC is also hoping to meet its Rs.22,000 crore capital expenditure target for the fiscal year 2020-21.