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PSUs to consider for Buy-Backs
Why is it in news?
- The Government has asked at least eight state-run companies to consider share buy-backs in the fiscal year to March 2021.
Details:
- The move comes amid, as the Centre searches for ways to raise funds to rein in its fiscal deficit.
- The firms asked include miner Coal India, power utility NTPC, minerals producer NMDC and Engineers India Ltd.
What is Buy-Back?
- A Buyback is when a company buys its own outstanding shares to reduce the number of shares available on the open market.
- A buyback is also known as a share repurchase.
- The companies buy back the shares from the existing shareholders by utilizing free reserves and other permitted sources of funds.
- Companies may choose to buy back when there are no other opportunities to utilize available cash with them in investment projects.
- Buyback of shares may also be used by companies as a signal that they see the shares as undervalued by the markets.