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State-owned companies have missed the bus when it comes to creating wealth for their investors, according to a study by the brokerage Motilal Oswal.
Down to 2% “Value has migrated from the PSU sector to the private sector. Wealth creation by PSUs is down to 2 per cent now, against 51 per cent a decade ago,” said Raamdeo Agrawal, Joint Managing Director, Motilal Oswal, while releasing its annual wealth creation study here.
These findings may not come as good news for the government, which is planning to divest it stake in the public sector undertakings mainly to check fiscal deficit. The government recently offloaded 5 per cent of its stake in SAIL, as part of its over ₹58,000-crore disinvestment target for this fiscal.
The Centre has lined up Coal India, Oil and Natural Gas Corporation, NHPC, Power Finance Corporation and Rural Electricity Corporation for this fiscal’s disinvestment programme.
Auto sector emerges fastest According to the study, two- and three-wheeler manufacturer Eicher Motors has emerged as the fastest wealth creator over the 2009-2014 period, with a compound annual growth rate of 94 per cent on its price, followed by Bajaj Finance, HCL Technologies, Supreme Industries and Page Industries.
The study defines wealth creation as the increase in a stock’s market capitalisation, after adjusting for equity dilution.
TCS, HDFC Bank and Infosys returned the most value to shareholders in the period, while Kotak Mahindra Bank, Asian Paints and Sun Pharmaceuticals were declared the most consistent.
With 51 per cent CAGR on its stock price, TCS delivered the highest-ever wealth creation in any five-year period in the country’s stock market history.
Technology clocked the most wealth by industry, creating ₹7.1 lakh crore in the five years since 2009, while the auto sector recorded the highest price CAGR. Oil and gas performed the worst, with its share of wealth collapsing to 1 per cent in the study period, compared with 22 per cent in 2009.
Reforms, need of the hour The blame to losing shareholder wealth went entirely to public sector companies, particularly MMTC, NTPC, BHEL, SAIL and NMDC. Only major policy reforms, and a complete change on how they do business, can turn around their fortunes, the report noted.
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