Navratna PSUs add flare to blazing stock mkt

The moniker of navratna for India's biggest public sector companies is proving to be a fitting one. For, in the past one year, the government has become wealthier by over Rs 3,14,000 crore or $78 billion thanks to the appreciation in the stock prices of public sector undertakings and new listings. And that's not all, the government earned a cool Rs 16,000 crore as dividend from the 58 listed central PSUs last year alone.

Combined, the sum is nearly equal to the central government's total net tax revenues during FY07. Or to put it differently, every aam admi is now notionally richer by around Rs 2,900 compared to a year ago, thanks to the listed PSUs.

The total market value of government holdings in PSUs is now almost $210 billion a 60% increase over the previous year. Besides a booming Sensex, new listings such as Power Grid Corporation, Central Bank, Indian Bank and Power Finance Corporation have powered this increase in wealth. Just to put things in perspective, the amount is equal to a fifth of India's GDP and over half of the country's public debt. If the government decides divest its entire holdings and distribute the money, a typical Indian family will get a one-time windfall of Rs 38,000.

The appreciation in government net worth would have been even higher if not for their refusal to increase retail fuel prices. The policy of subsidising fuel has significantly depressed the market capitalisation of oil & gas majors such as ONGC, IndianOil, Bharat Petroleum and Hindustan Petroleum.

Which brings us to the question: how do the capital and dividend returns compare with government's initial investments in these companies? The short answer is: extremely well. At the end of June '07, the government contribution to the equity capital of these 58 PSU in our sample works out to be around Rs 31,000 crore. If we consider the fact that in a majority of the cases government subscribed to the equity capital PSUs at par value, the dividend-yield itself works out to be over 50% every year and the capital appreciation is over 26 times. And they say governments don't make good businessman!

There have been a number of star performers in the Government portfolio. The biggest contributor to GoI wealth has been NTPC. The market value of government holding in the power major is now $23 billion, which is an increase of $13 billion. Next in line is minerals and metals trader MMTC, which has contributed $11 billion to the rise in government's net worth. The once mired under a mountain of debt and steeped in losses Steel Authority of India (SAIL), is now one of the biggest wealth creators in the business.

The market capitalistion of the country's largest primary steel producer has more than doubled in last one year to nearly Rs 68,000 crore. This has created an additional wealth worth $10 billion for the government. Other big contributors include recently listed Power Grid Corporation, Bharat Heavy Electricals and State Bank of India and Power Finance Corporation.