The growth in public sector undertakings’ (PSUs) assets slowed in the last three years. The asset growth of 33 PSUs included in this study decreased to 10.8% during 2009-10 from 17.2% a year earlier. For example, NTPC’s assets growth declined from 15.2% during 2008-09 to 9% during 2009-10 and IOC’s from 16.1% to 6.9% during the same years.
Assets in this context comprise fixed assets plus capital, work-in-progress, cash and bank balances, loans and other debtor balances, investments and other intangible assets, excluding accumulated losses.
This trend is also reflected in a study of the return on assets (RoA) of PSUs during the three years of 2007-10. There has been a decline in the RoA of PSUs during the three years.
RoA is a ratio that examines the relationship between the size of earnings (gross profits) and the total assets. The assets of a company comprise both debt and equity; both are used to fund the operations of a company. ROA gives investors an idea as to how efficient the management is in using its assets (or the money it holds) to generate earnings. The higher the ROA number, the better it is, because the company is earning more money on less investment. The relationship also gives a good indication of the profitability of PSUs’ assets.
The 33 PSUs had a gross profit of Rs 67,090 crore, Rs 64,043 crore and Rs 84,594 crore during the last three financial years, while their total assets stood at 3.89 lakh crore, Rs 4.56 lakh crore and Rs 5.05 lakh crore during the three years from 2007-08 to 2009-10.
A steady decrease in the ratio was seen in the case of GAIL (I), where it steadily declined from 31.01% during 2007-08 to 28.12% during 2009-10. In NMDC’s case, the decrease was from 60.41% to 37%.
Container Corporation had a return on assets of 33.12% in 2007-08 which steadily dipped to 26.34% during 2009-10.
The assets growth of GAIL(I) was higher than its gross profit growth during 2009-10 and 2008-09. For example, GAIL(I)’s gross profit rose 7.9% against a 14.5% growth in assets during 2009-10.
Among the 33 PSUs, five PSUs, namely Tide Water Oil, Engineers India, RCF, SJVN and IOC showed a significant increase in their RoA during the study period. The RoA of Engineers India rose from 26.67% during 2007-08 to 38.63% during 2008-09 and further increased to 60.42% during 2009-10. This can be explained from the profit performance of EIL; its gross profit shot up by 73.2% to Rs 531 crore during 2008-09 and further by 26.8% to Rs 673 crore during 2009-10. The asset of the company increased a slower pace of 19.6%, at Rs 1,375 crore, during 2008-09 and declined thereafter by 19% to Rs 1,114 crore during 2009-10.
In 2009-10, the top five PSUs according to total assets were NTPC, IOC, Powergrid Corpn, NHPC and BPCL.
