PSUs shed market value

Written by Pradip Kumar Dey | Updated: May 23 2011, 06:51am hrs
Though the stock markets have done well in the last one year, the government has lost significant wealth on its PSU stocks during the period. A year-on-year study shows the market value of 47 state-run entities eroded by R1.53 lakh crore between May 17, 2010 and May 17, 2011.

The FE study, which excluded banks and NBFCs, reveals the market capitalisation (m-cap) of PSUs, both central and state, fell 14.2% to R9.27 lakh crore from R10.80 lakh crore during the 12-month period.

A key reason for this was the under-performance of sectors like power and steel, where public sector companies have a significant presence. Says Jagannadham Thunuguntla, equity head, SMC Capitals Ltd: The stocks such as NTPC and NHPC have underperformed as the whole power sector has been under-performing last year, because of the long gestation period involved in power projects. Further, under-performance was also seen in stocks such as SAIL and MMTC.

The steepest m-cap loss, of R56,000 crore, was felt in MMTC, in which the government holding is 99.33%. MMTC had a dismal year in 2010-11. Its net profit fell by 47.8% to R112.77 crore in FY11 despite a 52.2% increase in its sales.

Generally, the environment for PSU stocks has not been favourable, with most of them recording substantially negative returns than the market as a whole. While the BSE Sensex has gained by 7.7% to 18,137.35 on May 17, 2011 from 16,835.56 a year earlier, but the BSE PSU Index has lost by 3.9% to 8560.39 from 8906.57.

For instances, the m-cap of PSU Index stocks SAIL decreased by 30.8% and Hindustan Copper by 43.6%. More than 30% decrease in m-cap was noticed in ten PSUs. They include STC, BEML, Engineers India, Dredging Corporation, Neyveli Lignite and SCI.

Only 36% of the PSUs managed to increase shareholder wealth in the last one year. Prominent among them were ONGC, Scooters India, Petronet LNG, Indraprashtha Gas and Gujarat Alkalies.

The government stake in ONGC is now worth R13,201 crore higher than it was a year earlier. From a price of R256.74 in May 2010, the share is currently worth R277.55.

The market cap of Petronet LNG increased by 60.5% to R5,008.13 crore from the level of R3,120 crore during the period. The company has done well last year, with its net profit rising by 53.2% to R619.62 crore during 2010-11 and sales increasing by 23.9%.