Hindustan Zinc, Shipping Corpn lift RoNW of PSU firms during 2000-01

Pradip Kumar Dey / FE Research Bureau

The return on net worth (RoNW) of 32 major public sector companies increased in 2000-01 over the previous year, indicating an improvement in the efficiency of generating higher shareholder value. The RoNW is measured as net profits as percentage of net worth. Of the 32 major public sector companies selected for this study, nearly 56 per cent was found to have increased their efficiency of generating higher shareholder value. Only profit making public sector companies during 2000-01 and 1999-00 are considered for this study. Some public sector companies latest year reserve figures are not available, so we have considered the previous years figures. This study traces the trend of RoNW for 32 public sector companies in 2000-01 and 1999-00. Aggregate net worth of 32 companies has increased by 7.0 per cent to Rs 1,33,544 crore during 2000-01 from the level of Rs 1,24,752 crore during 1999-00 but their combined net profits have increased by 17.9 per cent, resulting in a sharp increase in RoNW, higher from 13.61 per cent in 1999-00 to 15.00 per cent in 2000-01.

Of the selected 32 public sector companies, the top five according to the profit after tax (PAT) to net worth ratio during 2000-01 are Dredging Corporation (29.68 per cent), Container Corp. Of India (27.90 per cent), Bharat Electronics (27.75 per cent), Videsh Sanchar Nigam (24.80 per cent) and MTNL (23.85 per cent). Among the 32 public sector companies,14 companies have witnessed a fall in PAT to net worth ratio, while 18 companies have shown a higher ratio in 2000-01 compared with 1999-00.

A significant fall was witnessed in the case of ITI (17.30 per cent in 1999-00 to 9.53 per cent in 2000-01), Bhel (16.66 per cent to 8.16 per cent), ICICI (15.03 per cent to 6.74 per cent), Kochi Refineries (17.45 per cent to 6.26 per cent) and Bharat Earth Movers (2.47 per cent to 0.96 per cent).According to the Directors’ report, Kochi Refineries’ profit was lower partly due the volatility at crude oil price witnessed in the international market and lower demand for diesel oil, coupled with the additional investment for the Diesel Hydro De-Sulphurisation (DHDS) Unit (Rs 750 crore) for upgrading the quality of diesel oil which could not bring in any significant additional revenue. A significant improvement in 2000-01 was noticed in the case of Dredging Corpn (21.16 per cent in 1999-00 to 29.68 per cent in 2000-01), Bharat Electronics (20.56 per cent to 27.75 per cent), Videsh Sanchar Nigam (13.61 per cent to 24.80 per cent), Neyveli Lignite Corpn (8.58 per cent to 14.66 per cent), Hindustan Zinc (8.66 per cent to 14.58 per cent), Gujarat Mineral Development (8.10 per cent to 13.40 per cent), Shipping Corporation (8.42 per cent to 17.33 per cent) and Balmer Lawrie & Co (0.91 per cent to 3.45 per cent). Hindustan Zinc’s performance during the year 2000-01 was rated as “Excellent” under MoU with Ministry of Mines Govt of India. The financial year 2000-01 recorded zinc production of 1.48 lakh tonnes which was the highest ever, since inception of the company. The company posted a record net profit of Rs 169.22 crore an increase of about 87.1 per cent over the previous year. Similarly Shipping Corporation of India also showed an increase of 136.7 per cent to Rs 382.56 crore in its net profit during 2000-01 and the net worth of the company also increased by 15.1 per cent during the same period. These are the things helped the company to increase the RoNW during 2000-01. The highest and lowest RoNW was observed during 2000-01 in the case of Dredging Corporation (29.68 per cent) and Bharat Earth Movers (0.96 per cent) respectively.
The top 5 public sector companies in terms of net worth during the year under study were ONGC (Rs 29,898 crore), IndianOil (Rs 14,065 crore),IDBI (Rs 9,025 crore), ICICI (Rs 7,973 crore) and National Hydro Power (Rs 7,360 crore). For these companies, PAT as percentage of net worth ranged between 6 per cent and 20 per cent.

Although, most of the above companies figured among the top 5 in the previous year also. The highest increase in net worth was observed in the case of Container Corp. Of India (27.8 per cent) followed by National Aluminium (20.4 per cent), National Hydro Power (19.9 per cent) and BPCL (16.7 per cent). A decline in net worth was observed in the case of ICICI (-0.6 per cent) and IDBI (-1.1 per cent).