PSUs?CPSEs, PSBs and NBFCs?account for about 29 % of the total market capitalisation in India.
Generally speaking, there is a sense of confidence in investor circles about the Indian PSU stocks as they enjoy the perceived value of reliable revenue streams, tried-and-tested business models and strong balance sheets.
Within this precious segment of PSUs, there is an apparent difference in the market performance of some of these stocks. Especially, in the past two years, the power related PSUs have proved to be power-less in their market performance as they face long gestation in their projects. Besides, some of them face issues such as execution slippages, cost overruns, increasing financing costs, making the investors shy away from these stocks.
Further, the stocks that have come out with FPOs (follow-on public offerings) have seen significant volatility around their FPO period. Such stocks have seen significant short selling by global investors in the F&O (futures & options) segment, putting pressure on the share prices.
As share prices came under pressure with such short selling, many times, this had actually impacted the overall subscription response to such FPOs.
Some of the PSUs which have come out with their IPOs (initial public offerings) have received a warm welcome from the market. The IPOs of Coal India, Manganese Ore and Oil India have received a warm welcome, rewarding all the classes of investors.
While discussing about the performance of the PSUs, the hot topic is bound to be the role of ?disinvestment?. The current disinvestment programme provides a big opportunity for the retail investors to participate in the wealth creation process of Indian PSUs. Further, the listing of PSUs on the stock exchanges brings more visibility into the operations of those companies. This makes PSUs more accountable and brings in a sense of better corporate governance in such companies.
More importantly, the experience of UK suggests that disinvestment can be used as a big weapon to increase awareness about capital markets in the circle of retail investors. As of now, in India, there are only 1.8 crore demat accounts (that is, just 1.5% of the total population). To put in other words, out of every 200 Indians?only three have demat accounts.
As ?financial inclusion? has been one of the core objectives of the Indian government, the current wave of disinvestment shall be used to increase awareness about capital markets amongst the retail investors and shall work towards increasing the demat account penetration in the country.
Whichever way one looks at it, the significance of PSUs amongst the capital market fraternity is set to move up. The government shall price the PSU public issues reasonably enough for the retail investors, so as to ensure wider wealth distribution amongst the people.
(The writer is strategist & head of research at SMC Global Securities)