The combined market capitalisation of all PSU banks has fallen below the amount of money these state-run lenders have received from the government in the last five year by way of recapitalisation, prominent fund manager Nilesh Shah has pointed out.
The combined market capitalisation of all PSU banks has fallen below the amount of money these state-run lenders have received from the government in the last five year by way of recapitalisation, prominent fund manager Nilesh Shah has pointed out. The market cap of PSU banks, excluding SBI, fell to Rs 2.3 lakh crore, which is less than the Rs 2.5 lakh crore bank recapitalisation given out in the last five years, Nilesh Shah, MD, Kotak Mahindra AMC, said this week. This week, PSU bank shares tumbled after the Narendra Modi government announced a mega merger drive.
“From May 2014, all the listed PSUs are down in market cap by 21% and majority of them are public sector banks. On the other hand, the Sensex is up roughly about 66% so effectively 66% plus 21 it is an 87% underperformance in the last five years in public sector stocks,” Nilesh Shah said in an interview to ET Now, adding that if size was the only criteria, than dinosaurs would not have been extinct.
According to a recent report by Kotak Institutional Equities, the combined market capitalisation of the 10 to be merged mega entities stands at 1.14 lakh crore. Notably, the current market value of PNB, OBC, United Bank, which are set to merge to create India’s second largest government-run bank, stands at Rs 47,700 crore. PSU lenders Canara Bank and Syndicate Bank have a combined market value of Rs 25,300 crore. Union Bank, Corporation Bank and Andhra Bank have a total market value of Rs 27,600 crore, while the market cap of Indian Bank and Allahabad Bank put together stands at Rs 23,000 crore.
The Govt has infused Rs 2.5 lakh crores in PSU banks (excluding SBI) between FY 2016 to 2019 ( excluding Rs 70000 cr proposed this year ) and current Market Value is Rs 2.3 lakh crores!!!
What a waste of incredible talent and assets.
— Nilesh Shah (@NileshShah68) September 4, 2019
Highlighting key concerns in the PSU banks, Nilesh Shah said that it is not the size, but the nimbleness that matters and unless these banks attract the right talent by giving appropriate compensation and freedom to work, this model is unlikely to succeed. “One of the reasons why public sector stocks have not performed is not because they do not have incredible assets. Many of these companies are monopolies. Whenever we have seen private sector hiring public sector employees, they create a miracle,” he noted. Shah said that while the merger is a step in the right direction, it is not the final destination. The government must empower public sector organisations to take administrative decisions without external influence, he added.