Public sector enterprises need to urgently tap the booming stock markets and unlock valueThe Sensex closed at 19,929 on November 14, and ironically, it’s no child’s play for investors now. Individuals as well as corporates have made a mother lode out of the Indian stock market, and many companies are lining up their IPOs in the coming time to capitalise on the bull run. However, the most intriguing aspect of this atomic rise is – while on one hand India Inc. has been highly successful in unlocking value, on the other, the lethargic public sector enterprises are failing miserably to do so. And that too when they are faced with a golden opportunity! Jignesh Dhabalia, equity analyst, India Capital Markets, tells B&E, “The current bull run served as an fantastic opportunity for unlisted & listed companies... Even now it’s a good time to unlock value.”
Instances of this abound across sectors. ICICI Bank recently mopped up $5 billion from the markets while SBI is still unable to put its blue-print to raise money into use, which now has been lingering for over six months. Similarly, Tata Steel intelligently tapped markets via rights issue to fuel its ambitious expansion plans, SAIL is no way near. Even in aviation industry where players like Air Deccan, Jet, and Spice successfully hit the bourses, the oldest government-owned carrier Indian is yet to chalk out its listing plans post its merger with Air India. The list goes on and on. Barring a few like NTPC, ONGC and BHEL, PSUs have largely missed the highway to 20K. In 2007, when the IPO rush amongst companies was at an all time high, out of 82 IPOs/FPOs, there were only five PSU issues. Listing can help the government in its development programmes too. A 30% stake in IOC is enough to build hospitals & schools in every village.
Realising the need of the hour, Prime Minister Manmohan Singh recently commented to the press, “It may be useful for most PSEs to be listed on stock exchanges as this would enhance professionalisation of the Board of Directors & other independent directors. Induction of independent directors will ensure greater efficiency & effectiveness in decision-making...” But the Government should take the call and do away with clauses like minimum 51% holdings so that the unlocking process is transparent & logical.
The government should take lessons from their peers in China. Off late Chinese PSUs have been coming up with some of the world’s biggest IPOs – Petrochina, ICBC et al. So even now, if the PSUs fail to engage in raising money through public listings, they may not get a better time than this.
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
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