Listed PSUs make govt richer by Rs 5.56 lakh crore in a year

Mumbai: The government of India has gained significantly during the recent bull run in the stock markets with about 44 state-run entities (excluding banks and NBFCs) adding Rs 5.56 lakh crore in market value during the last one year.

According to an analysis of the share price movement of state-run firms since March 9, 2009, the market capitalisation of companies with promoter holdings of central or state governments has increased by 93%, from Rs 5.97 lakh crore on March 9, 2009, to Rs 11.53 lakh crore on March 9, 2010.

Jagannadham Thunuguntla, equity head, SMC Capitals Ltd, said: “PSUs have strong balance sheets, reliable revenue streams and tried-and-tested business models. In the industries where they operate, these companies often enjoy virtual monopoly situations. All these factors make PSUs favourities among the capital market circles. For those investors who seek stable returns, PSUs have proven to be perfect bets.”

The promoters of three most valued PSU firms –– oil exploration giant ONGC, commodity trading firm MMTC and mining company NMDC –– have contributed more than half of the total gains during the previous one year.

Government holding in MMTC is 99.33%, while in NMDC it is 98.38%. Its holding in ONGC is over 74%, and the same is 89.5% in NTPC. Bhel and SAIL have government holdings of 67.72% and 85.82%, respectively.

Trading giant MMTC has gained the highest amount of wealth, with the government stake in the company now worth Rs 1.02 lakh crore more than it was on March 9, 2009. From a price of Rs 13,081.80 on March 9, 2009, the share is currently worth Rs 33,650.65. In hot pursuit is another company in the mining sector, NMDC, where the government stake gained Rs 91,000 crore in market capitalisation during this period.

The environment for PSU stocks has been extremely favourable with most of them recording substantially positive returns than the market as a whole.

While the BSE Sensex has increased by 108.97% to 17,052.54 on March 9, 2010, from 8160.40 on March 9, 2009, the BSE PSU Index also gained by 96.5% to 9187.22 from 4675.53.

Though the increase in share price has been spectacular in some other cases, it has have not translated into larger wealth creation for the government, given the inherently small size of these...