Public sector undertakings are putting more of their cash reserves in projects of subsidiaries and other companies to enhance their asset base than invest in liquid instruments like bonds and debentures.

An FE study of the investment patterns of 47 PSUs reveals a rise in their project investments and a fall in the ratio of money parked in liquid assets.

In 2010-11, the sample companies invested R34,462 crore (R29,931 crore during ?09-10) in company projects, R44,436 crore (R54,149 crore) in debentures and bonds and R3,962 crore (R4,769 crore ) in mutual funds units.

The share of equity investment in PSUs? total investment increased from 33.01% during ?09-10 to a high of 39.98% during ?10-11. In contrast, the share of debentures and bonds in total investment decreased from 59.72% during ?09-10 to 51.56% during ?10-11.

Similarly, the share of mutual funds units in total investments decreased from 5.26% during ?09-10 to 4.59% during ?10-11. This indicates that the PSUs are investing more in their own projects.

A significant increase in investment in equities was seen with BHEL, GAIL India, Oil India, ONGC, HPCL and IOCL.

The investment by BHEL in equities increased by 786.4% to R402 crore during ?10-11 over the previous year, mainly on account of equity participation in joint ventures and subsidiaries.

In ?10-11, a more than 45% growth in direct investments was seen for six companies, including BHEL, NMDC, Neyveli Lignite and BPCL.

A significant decrease in investment in debentures and bonds was seen in the case of IOCL, Neyveli Lignite, Power Grid Corporation and NHPC.

Companies that invested significantly in mutual funds in ’10-11 include National Aluminium, Engineers India, Petronet LNG, Indraprastha Gas and PTC India. Nalco?s investments in units increased by 34.9% to R1,331 crore during 2010-11.

Eight PSUs recorded an increase of more than R100 crore in investments during 2010-11. They include GAIL(I), Petronet LNG, NHPC, SCI and PTC India.

The top five among the 47 major PSUs in terms of investments during 2010-11 were IOCL , NTPC, BPCL, HPCL and PTC India.

Out of 47 PSUs, 19 showed a rise in their investment-asset ratio during ?10-11. Significant among them were Engineers India, Petronet LNG, PTC India, HMT, Nalco and NHPC.

An interesting aspect is that 30% of PSUs exceeded the average ratio of investment-to-assets during 2010-11.