By listing 31 profit-making public sector undertakings (PSUs) with 10% public floats, the exchequer will be richer by a handsome Rs 30,000 crore, according to FE analysis. This is based on a conservative, albeit realistic estimate of a 50% discount to the BSE PSE index, which means if the valuation norm for the index is applied, the earnings could double.
And there are 19 other unlisted PSUs that also qualify for listing according to the criteria cleared by the Cabinet last fortnight. FE analysis of the top 31 of 50 unlisted PSUs also indicates that the proceeds to the government from their divestment would surpass that from the proposed follow-on public offers of the ten listed PSUs.
This is a cash flow that would provide a healthy buffer to the government’s non-tax revenues. FE looked at the top 31 of these companies, as they are likely to attract most investor interest. The study calculated the possible valuation these undertakings would conservatively attract. For this, the book value of each PSU was obtained and a price-to-book value multiple of 1.64 times was used to arrive at a possible price. This was multiplied by the share capital to arrive at a possible market value.
The estimate of 1.64 times the book value is actually a 50% discount to the actual BSE PSU Index, which is a basket of listed PSUs, and the valuation norm for the index is at 3.28 times the book value. Therefore, market capitalisation as well as realisation by the government could be more if near-market valuations are used.
Others reckon the collections could be much more. According to Kishore P Ostwal, CMD, CNI Research, ?The fare value which the government could get from unlisted PSU stocks may be as high as Rs 60,000 crore for the 10% sale stake in 31 PSUs. These companies have huge intrinsic values in terms of infrastructure and land.?
An analyst with a leading FII said many of the PSUs were still valuing their real estate and properties at book value–almost near the cost of purchase. These would have clearly grown in current terms, so there is tremendous value waiting to be unlocked.
Among the 31 unlisted PSUs, Nuclear Power Corporation of India, Coal India, BSNL and Rashtriya Ispat alone would create a significant amount of wealth for the government. Take NPCI, which posted a net profit of over Rs 441 crore and net sales of Rs 3,010 crore for the year ended March 2009. The company will emerge one of the largest power companies on the bourses with a market capitalisation of close to Rs 37,363 crore. By off-loading 10%, the government could get Rs 3,736 crore.
BSNL, with net sales of over Rs 30,268 crore and net profit of Rs 575 crore as of March 2009, will emerge one of the largest telecommunication companies on the bourses with a market capitalisation of close to Rs 1.33 lakh crore. By divesting 10% stake, the government could get Rs 13,387 crore.
Of the remaining companies, more than Rs 500 crore in wealth could be added to the government?s kitty by Coal India, Rashtriya Ispat, Satluj Jal Vidyut, THDC, NE Electric Power, Hudco, Airports Authority of India, South East Coal, Northern Coalfield and Hindustan Aeronautics. Rashtriya Ispat, with a net profit of over Rs 1,943 crore and net sales of Rs 9,065 crore during the year ended March 2008, could be valued at Rs 14,097 crore, of which 10% cent is Rs 1,410 crore.
However, investment-banking experts cautioned that the government would not be able to bring 31 companies to the market all at once and would have to build a comprehensive timetable to ensure that the value proposition is not lost.
