The Hindu Business Line : The power to unlock

Three days before the Power Grid Corporation of India (PGCIL) issue opened, the Finance Minister, Mr. P Chidambaram, stressed the importance of listing as a means of “unlocking” the full potential of PSUs without altering their character as state-run enterprises. As if endorsing his views, the PGCIL issue closed with responses from both domestic and global investors that must have surpassed the most optimistic expectations. Overall, the issue was oversubscribed 64 times; according to the managers to the issue, the institutional investors segment was subscribed 116 times, and the high-net-worth individuals segment 41 times. But what has ensured the PSU a place in the history books is the global enthusiasm for the issue: $30 billion in bids.

Such a huge response to an Indian offering is all the more remarkable because a state-run enterprise bested Reliance Petroleum’s $25 billion from domestic and global institutional investors; that a PSU diluting just 14 per cent of the government stake with its maiden listing attempt could elicit such a response bears testimony to the vast gulf between the market’s perception of the real worth of a company and that of the government. . Power Grid was termed a mini-ratna; but clearly, investors have displayed a greater optimism in the PSUs capacity to unlock its potential, despite the fact that the government will retain 86 per cent stake in it. With the issue price being fixed at Rs52, the top end of the band, Rs 994.81 crore will accrue to the coffers of a government that has affirmed its commitment to social development of the poor through a calibrated divestment of its equity in state-run enterprises. Maybe the price could have been set higher, but a more profound lesson for the government should be to recognise the potential that greater autonomy for decision-making gives PSUs. It is one thing to reap the benefits of equity dilution, but quite another to sustain it. To do that, ministerial interference must cease. For every initiative like Power Grid, one witnesses unseemly interventions, as in BSNL’s routine working recently and ONGC in the past.

The most important lesson New Delhi can learn, therefore, is the hardest; listing alone will not unlock the value of a PSU as much as it will simply provide the government with notional wealth on rising stock valuations. What will deepen the value of the PSU is managerial autonomy and competitive remuneration for skilled personnel.

Related Stories:
PowerGrid issue attracts $30 b overseas subscriptions
PowerGrid IPO price band fixed at Rs 44-52

More Stories on : Editorial | PSU | Power | IPOs

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

Stories in this Section
The power to unlock

Role of public representative director in corporate governance

DRDO: Nourishing and protecting the Armed Forces

Consumer welfare and development are inseparable

‘Bubbles are good for the economy’

Bankers on guard