Much has been written about the markets over the past year, and how dramatically the 30-share Bombay Stock Exchange Sensitive Index (Sensex) has moved, yo-yoing several hundred points in a matter of days. Over the past couple of years, the market trend has clearly been an upward one, making investors a happy lot. The Sensex, having breached several milestones during 2007, is now flirting with the 21,000 mark. But economic uncertainties in global markets, particularly in the US, have meant that experts are now betting on the fact that emerging markets such as India will reap the benefits of the interest rate differential owing to the higher returns the Indian market offers. Add to this the robust regulatory regime in India, and most market-watchers are certain that 2008 will also be a good year for Indian stocks, if not as dramatic as the year gone by.
Given this, it is interesting to examine how India?s public sector undertakings (PSUs) listed on the bourses?quite literally the government?s jewels?have fared in the market, both collectively and in isolation. The equity boom has rubbed on the PSUs too. An FE Research Bureau study on the market performance of listed PSUs (excluding state-owned banks) clearly shows that the government is sitting on a pile of gold.
Consider some figures. Taking the period between January 2, 2007 and January 3, 2008, 39 listed PSUs saw a combined gain in their market capitalisation to the tune of a hefty Rs 9,37,776 crore, or a staggering 147%. The government?s average shareholding in these companies stands at a comfortable 77.23%, so there is no danger of political opposition if it cedes a small part of its holding to other investors.
Now take individual companies. The highest growth in market capitalisation in this period was recorded by MMTC, a jaw-dropping 1,603%. In this company, the government?s stake is 99.33%. Take another case, that of State Trading Corp, which saw its market cap soar by 743.5%. The government stake here stands at 91%. National Mineral Development Corp, 98% government-owned, saw a 575% leap in market cap. Hindustan Copper recorded a market cap growth of 556%, and it?s 99.5% centrally owned.
These are just a few of the best performing PSUs in terms of market cap. There are several others in the list, with market cap increases in the range of 200-500%, all of which have government holdings that would remain secure even after offloading some shares. This would be a neat way to get some money into the government?s coffers.
A sense of how the numbers look can also be gauged from the fact that offloading a mere 5% in MMTC could bring in upwards of Rs 9,304 crore for the government, while selling a similar amount in National Mineral Development Corp could net it Rs 10,072 crore.
Finance minister Palaniappan Chidambaram has been clear that riding piggyback on public offers by the PSUs can be a good way of generating monies for the government. At a time when the market is clearly deep enough, safe and hungry for quality paper with enough wherewithal to lap up good issuances, it is time for the government to take a comprehensive look at the enormous pile of cash it is sitting on. Unlocking even a very small part of its enormous holdings in many of these PSUs could be an easy way of raising liquid resources for investments in key priority areas like urban and social infrastructure.
The government?s Left allies may not need too much persuasion on such a move, given the small size of the stakes sold and the large sums they can generate. Clearly, the time for the government to unlock value from its PSUs is now. The market is known to be pretty fickle. It would be a pity if an opportunity of this magnitude is lost simply because policymakers couldn?t get their timing right.