Value of PSUs erodes by Rs 8 lakh crore

Written by Pradip Kumar Dey | Mumbai | Updated: Dec 2 2008, 06:58am hrs
While deficit numbers threaten to swell as the GDP contracts and exports diminish, the government could have well missed out a strong opportunity to disinvest some of its stake in the public sector undertakings.

And now, due to the market meltdown, its wealth has decreased by 59.1% (Rs 8.04 lakh crore) during 2008. At current market prices (as on November 24, 2008) of the shares of these companies, the government holding is worth about Rs 5.56 lakh crore. But, at the start of the current calender year (January 1, 2008), they were worth Rs 13.60 lakh crore. And even a 10% disinvestment would have netted the government around Rs 1 lakh crore.

Notionally, the government of India is poorer by nearly Rs 8.04 lakh crore on its holdings in 53 listed public sector undertakings (PSUs), all in a space of eleven months (up to November 24, 2008).

This has happened probably due to poor profit performance of PSUs in Q2 and global financial crisis. The market sentiment was not in favour of companies including PSUs since January 1, 2008.

Mining & mineral giant NMDC has lost highest amount of wealth, with the government stake in the company now worth Rs 1.34 lakh crore less than it did at the beginning of the year. From a price of Rs 483.86 on January 1, 2008, the share is currently worth Rs 140.1. In hot pursuit is another company in the trading sector, MMTC, where the government stake lost Rs 1.12 lakh crore during this period.

The environment for PSU stocks has been extremely unfavourable, with all of them recording substantially negative returns than the market as a whole. While the BSE Sensex has decreased by 56.1% to 8,903.12 on November 24, 2008 from 20,300.71 on January 1, 2008, BSE PSU Index lost by 56.8% to 4,597.04 from 10,633.48.

Though the share price decrease has been spectacular in some other cases, they have not translated into larger wealth erosion for the government given the inherently small size of these companies.

Thus, a company such as Tide Water Oil has seen its decrease by over Rs 1,890.10 in terms of absolute share price, but that eroded only another Rs 40 crore in wealth. A decrease of Rs 81.80 in share price in the case of Hind Organ Chem diminished in to Rs 323 crore in wealth.

Not only mining and mineral stock showed significant decline in market capitalisation but some other companies like SAIL also showed bearishness.

Consider government stake of SAIL, which dropped by 77.92% or RCF, which decreased by 78.68%. Less than 50% decrease in market capitalisation was noticed in the case of BPCL, HPCL,Tide Water Oil, Power Grid Corporation, IOCL, ONGC, NTPC, TN Newsprint, GAIL(I), Container Corporation and Indraprastha Gas.

Not surprisingly, GMDC has topped the charts, with a decline of over 87.6% in the last eleven months (upto November 24, 2008).