The Hindu Business Line : How rising stock prices have bolstered Govt wealth

If steadily climbing stock prices have added a few more zeros to your personal wealth, there's also an unexpected beneficiary from the stock market rally — the Union Government.

No, we are not referring to the taxes on capital gains that go to fatten the exchequer.

We are referring to the equity stakes held by the Central/State Governments in the listed companies of India Inc.

At today's stock prices, the value of government equity holdings in Indian companies (mainly PSUs) stands at Rs 5,26,200 crore.

To put this number in perspective, the total domestic debt owed by the Central Government stood at Rs 15,22,031 crore at the end of the previous fiscal.

Equity stakes

This suggests that, theoretically speaking, if the governments' equity stakes in PSUs were to be encashed at today's prices, the sum raised could pay off a third of the Centre's internal debt.

The above represents the value of government stakes in the listed entities alone.

The number would expand substantially if market valuations were to be placed on unlisted PSU behemoths such as BSNL, Power Grid Corporation or Power Finance Corporation.

The Government's equity portfolio is, however, quite a concentrated one, with just two stocks — ONGC and NTPC accounting for 48 per cent or nearly half of the total wealth.

Expansion

With rising stock prices, there has been a 35 per cent expansion in the governments' wealth, as captured in the market capitalisation of its equity holdings, over the past year.

That translates into about Rs 1,35,400 crore of additional wealth on its books. Stocks such as SAIL (93 per cent expansion in market cap), Bharat Electronics (87 per cent), IDBI (73 per cent) and PNB (52 per cent) have been among the top performers in the governments' equity portfolio over the past year.

This portfolio has, however, lagged the overall stock markets in its pace of wealth creation.

The total market capitalisation of Indian stocks has risen by 57 per cent over the past one year, compared to the 35 per cent expansion in the market cap of government holdings in the Centre and state-owned PSUs.

But PSU stocks as a class have under-performed the broad markets over the past year, with the BSE PSU index generating only a 38 per cent return as against the 43 per cent return on the BSE Sensex.

Related Stories:
PSU stocks outperform other indices

More Stories on : PSU | Stocks | Outlook | Oil & Natural Gas Corporation Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Weakened storm wagging tail over Konkan, Gujarat

How rising stock prices have bolstered Govt wealth

Exploration bids: Tighter norms likely to protect Govt share

Cane arrears of UP's top 10 sugar cos touch Rs 1,500 crore

Moser Baer looking for expansion in photovoltaics

Sun Micro launches server for Rs 75,000

Analysts remain upbeat about gold prices

Groundnut oil prices high on increase in liquor consumption

Shortcomings galore in Motor Vehicles Amendment Bill: Experts

Both bull and bear lack conviction

ICICI Bank may renew efforts for FIPB nod