There is a telling difference between the set of companies that make up the Sensex at the Bombay Stock Exchange and the Nifty at the National Stock Exchange. There are four public sector units in the 30 companies in the Sensex but twice that in the Nifty series. However this is only part of the story. To get a flavour of how significant the PSU universe has become in the stock market, especially since the beginning of this year, take a walk through the following.
The aggregate market capitalisation of the 37 PSUs has increased by Rs 5 lakh crore, a whopping 68.7% from January 1 this year till the end of November. From Rs 7.32 lakh crore as on January 1, 2009 it has risen to Rs 12.35 lakh crore on November 30, 2009.
This indicates the level of importance in the broader market of the listed companies. The PSUs now account for almost 30% of the market capitalisation of the total universe of listed companies in India. For 48 companies, that is a sizeable impact on the listed market universe.
During this period, the BSE- PSU Index also increased by 3,689.14 points or by 67.7% to 9139.38, from 5,450.24 as on January 1, 2009. In the same period, the Sensex increased by 7,022.76 points or 70.9% to 16,926.22 from 9,903.46 as on January 1, 2009.
Among the PSUs the 37 that are quoted daily for the past four quarters have seen their net increase by 2.5% to Rs 51,670 crore as compared to previous four quarters, though sales decreased by 6.6% to Rs 4.61 lakh crore.
Other than the global meltdown that spooked non state supported companies, the increased majority with which the UPA came back in the second term also increased the value of these companies. The PSUs, as the market rightly expected, would be divested to some degree.
Kishor P Ostwal, CMD, CNI Research said: “The total PSU disinvestment programme of government of India is close to Rs 1 lakh 20 thousand crore for a period of 2 to 3 years which is prompting investors to buy PSU stocks. PSU stocks were grossly undervalued due to the fact that the earlier government were unable to unlock the value from PSU stocks. After the new government initiated disinvestment programme, the shares of PSU stocks started appreciating .”
The average P/E ratio of these PSUs increased from 14.52 on January 1, 2009 to 23.91 on November 30, 2009. The highest increase in P/E ratio is for MMTC followed by Dredging Corporation and National Aluminium Company respectively. The P/E ratio of National Aluminium increased from 7.47 on January 1, 2009 to 41.24 on November 30, 2009.
Consider ONGC, the numero uno in terms of market capitalisation. It has improved its rank from second to first as on November 30, 2009, gainin value by Rs 1.1 lakh crore. Its net profit has also increased by 5.8% to Rs 5,089 crore during July-September 2009 from the level of Rs 4,808 crore during July-September 2008, though the sales of the company decreased by 13.4% during the above period. The P/E ratio of ONGC increased from 7.94 to 17.54 on November 30, 2009.
However, its closest competitor NTPC slipped from first to second slot, despite gaining Rs 22,675 crore to its market cap.Though the net profit and sales of the company increased by 2% and 11.7% respectively during the second quarter, the P/E ratio of NTPC decreased from 21.6 on January 1, 2009 to 19.86 on November 30, 2009.
MMTC got the third spot on both the periods, and the company’s value, as measured by the stock market, increased by Rs 71,048 crore over the study period. The net profit of the company increased by 4.2% to Rs 49 crore during July-September 2009 and the sales decreased by 24.5% to Rs 9,432 crore during July-September 2009. The P/E ratio of MMTC increased from 436.16 to 1106.15 during the study period.
A significant increase in M-Cap was seen in the case of Engineers India , BEML, Hindustan Copper, STC, SAIL, Bharat Electronics, Neyveli Lignite, NMDC and Gail. The market capitalisation of Engineers India increased by 193.5% to Rs 7,988 crore on November 30, 2009 from the level of Rs 2,721 crore on January 1, 2009.
Only decline in M-Cap was seen in MTNL stock during the study period. It lost Rs 378 crore from its market capital, a decline of 7.5% over its January 1, 2009 level of Rs 5,030 crore.
