The Hindu Business Line : The issue of listing more PSUs

The cryptic announcement by the Union Finance Minister, Mr P. Chidambaram, in his Budget speech that it is the policy of the Government to list more Central public sector enterprises (CPSEs) in the bourses to unlock their true value and mend corporate governance, has undoubtedly stoked speculation that the Government is planning to divest a small portion of PSUs equities, reviving the stalled disinvestment process that was abruptly halted on July 6, 2006, pending further review.

Subsequent to Mr Chidambaram’s declared desire of the Government to list more CPSEs, over and above the 44 CPSEs already listed, reports surfaced that the Government is bracing itself to seek the Cabinet nod for a proposal to list a few profit-making PSUs and to divest small (up to five per cent) holdings in some of these firms to part-fund its massive loan waiver programme for the poor peasants.

There is absolutely nothing hanky-panky about the intentions since cross-subsidising industry and consumers is the name of the game and in this case, a few family jewels could be palmed off to support the badly shattered members of the family, groaning under heavy debt and debt servicing cost.

In fact, the Economic Survey released a day before the Budget did touch upon the need to wind up the process of selling of 5-10 per cent equity in previously identified profit-making non-navratnas. It even went bold to demand listing of all unlisted PSUs and sell a minimum of 10 per cent equity to the public. Interestingly, the Public Enterprise Survey 2006-07, tabled in Parliament after a few days of the Budget and which was not taken due cognisance by the media, noted that the receipts from disinvestment during April 1, 1991 to end-March 2007 amounted to Rs 49,241.64 crore. As per this Survey, the number of public enterprises as on March 31, 2007 was 247, excluding seven insurance companies. During 2006-07, 13 CPSEs were closed or merged with other CPSEs or ceased to be public sector enterprises.

Of the 217 operating CPSEs, 156 were profit-making and 59 CPSEs were loss-making. It is revealing to note that 10 companies led by ONGC with Bharat Sanchar Nigam Ltd, IOC, NTPC, SAIL, Coal India, BHEL, GAIL (India) Ltd, National Aluminium Company Ltd and National Mineral Development Corporations Ltd accounted for close to 63 per cent or Rs 56,341 crore of the total profits of all profit-making CPSEs.

Similar is the story with the 10 loss-making PSUs led by Fertiliser Corporation of India, Hindustan Fertiliser Corporation Ltd, National Jute Manufacturers Corporation Ltd, Hindustan Photofilms Manufacturing Co Ltd, National Textile Corporation Ltd, Air India Ltd, ITI Ltd, Indian Drugs & Pharmaceuticals Ltd, Hindustan Cables Ltd and Indian Airlines Ltd which together amounted to Rs 6,236 crore during 2006-07 which was as high as 76 per cent of the total net loss of all loss-making PSUs. Thus there is a distinct pattern in the domination of a few companies both on the profit and on the loss side, leaving a large number of profit-making non-navratnas in an unenviable slot.

With the Government keen on listing a few non-navratnas, the Survey’s findings on this score need to be highlighted to lend clarity to the proposed move. As many as 44 CPSEs are already listed on the stock exchanges out of which five were not traded during 2006-07.

Since IBP Co Ltd has been merged with IOC, trading in this script was discontinued. So the total market capitalisation (M-Cap) of 38 CPSEs, based on the stock price in Bombay Stock Exchange as on end-March 2007, was Rs 6,53,924 crore.

With stock markets in the country witnessing subsequent wild movements, both dizzying ups and steep downs — from over 20K to slightly above 15K now—even the listed CPSEs M-Cap would have undergone considerable denudation in value. If this is the ground reality now, is it feasible for the authorities to derive advantages by listing a few PSUs and selling a small portion of their stakes to the public when the appetite for equity among retail investors is not so favourably disposed?

In the current phase of marked-to-market sentiments where an established power company such as NTPC’s share does not fetch as much as a novice company which has not even generated a single unit of power, the plight of non-navratnas, if they go to the market, is indubitably abject. Since sentiments vastly rule the bourses, the CPSEs have to improve on several fronts through board-managed corporate governance before they eye the bourses to knock down their flab and get to ascertain their real value from retail investors, market analysts contend.