Government wants PSUs like Coal India, Oil India and NTPC to take a leaf out of private sector and use additional cash to buy back shares and improve balance sheets.
"Major private sector firms s have a treasury wing to make use of their cash balance more effectively. PSUs have so far not been able to manage their cash balance efficiently. DIPAM will endeavour to help PSUs to utilise their cash balance for resource augmentation," an official was quoted as saying by news agency PTI.
At least eight private sector companies, including Bharti Airtel, Bharti Infratel, Dr Reddy's, Wipro and OnMobile Global have announced buy-back plans of about Rs 7,700 crore.
"Private companies have been using buy-back as a strategy of investment management. They assess ways to increase resources and at the same time how best to maximise returns to equity shareholders," he added.
With public sector firms sitting on an projected cash pile of Rs 2.6 lakh crore, leveraging excess cash would be the best route for them rather than going for disinvestment.
"If you are having huge cash balance, is it suggested to divest promoter holding or leverage the cash first? If the return on cash balance is not more than bank rate then there is no cause for holding huge cash. The PSUs should take professional views on balance sheets," the official said.
Buy-back helps a company to cut equity by using idle cash and therefore provide healthier returns to the shareholders.