Overseas investors are increasingly reposing their faith and money in PSUs with as many as nine public sector firms including Coal India, PowerGrid Corp and NTPC, recording an increase in FII holdings over recent months.

According to an analysis of 11 public sector units that came out with initial share sales in the past two years, nine companies saw an increase in their FII shareholdings in the quarter ended December, 2010, vis-a-vis the September quarter, while two companies — Oil India and Engineers India — witnessed a decline in FII shareholding.

In the case of another PSU that conducted a stake sale, MOIL, data on FIIs’ shareholding during the quarter was not available on the Bombay Stock Exchange.

Central transmission utility PowerGrid saw an over seven-fold jump in FII shareholding to 12.05 per cent in the quarter ended December 31, 2010, from 1.65 per cent in the September quarter.

PowerGrid’s experience was replicated by Coal India after it made its listing debut in November last year, with the company witnessing a two-third increase in FII shareholding in two months to 5.54 per cent at the end of the December, 2010.

As of October 30, the company had a FII shareholding of 3.32 per cent.

Analysts attributed the trend of increased FII holdings in PSUs to the strong balance sheet and long-term prospects of these entities.

NTPC saw its FII shareholding climb to 3.36 per cent in the quarter ended December from 2.85 per cent in the September quarter. FIIs’ shareholding in Shipping Corporation rose to 2.32 per cent in the quarter under review from 1.98 per cent in the September quarter.

Despite the government’s larger holding in these companies, their operations are based on sound business practices, so the chances of facing corporate governance issues are very less, which is also one of the primary reasons for the increasing FII holdings, CNI Research CMD, Mr Kishor Ostwal said.

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