Current Affairs

Issue

The board of directors of GAIL is set to consider a share buyback of shares which will distribute surplus reserves to shareholders including the Government of India.

 

Background

The centre has asked a number of public sector units to issue buybacks to help shore up its finances, which have been hit by the pandemic. 

 

Details

Share buyback

• A share repurchase or buyback is a decision by a company to purchase its own stock from the market.

• Such a move reduces the number of outstanding shares of the company and tends to push up their price and is often undertaken when management considers the company’s shares undervalued.

• It is also a key way to transfer surplus earnings to shareholders and tends to lead to an increase in share prices.

 

Benefits to the government

• The government holds 52.1% stake in GAIL. In a recent share repurchase offer by NTPC, the government of India sold shares worth over Rs 1,066 crore back to the company accounting for around 47% of the shares.

• The government also received Rs 1,377 crore from a share buyback offered by NMDC taking up over 99% of the buyback offer.

 

GAIL

• GAIL is an Indian public sector natural gas processing and distribution company headquartered in New Delhi.

• Its business include natural gas, liquid hydrocarbon, liquefied petroleum gas transmission, petrochemical, city gas distribution, exploration and production, and electricity generation.

• GAIL was conferred with the Maharatna status on 1 Feb 2013, by the Government of India.