PSUs emerge unscathed by market plunge

Delay in investing Rs 72,000 crore in mutual funds saves government-owned companies from losses.

The government-owned companies have been unwittingly insulated from the stock market plunge, as their innate caution and risk aversion led to a delay in proposed investments of around Rs 72,000 crore in equity-linked mutual funds.

CAUTION PAYS

The government had permitted navratna and mini-ratna companies to "risk" 30 per cent of their cash surplus in mutual funds

The consent is valid till August this year and the government will review its decision thereafter

Last July, when the Sensex was trading at 15,700, the government had permitted public sector companies with navratna and mini-ratna status (good performers are permitted a degree of autonomy) to "risk" 30 per cent of their nearly Rs 2,40,000 crore cash surplus in mutual fund investments.

The consent is valid till August this year and the government will review its decision thereafter. But the companies have been tentative in their response.

While many are yet to seek board approvals, a few have started investing, albeit in debt-linked mutual funds, which is a reflection of their risk-averse nature.

Meanwhile, the Sensex rose nearly 33 per cent since July to peak at 20,873 points on January 8 this year, before beginning its free fall. The index has fallen by 28.17 per cent to 14,994 points since its peak.

Telecom company MTNL, which received the approval of its parent ministry a couple of months back to invest in equity-linked mutual funds, is only putting money in debt-linked schemes.

"We have not risked our money," said a top MTNL executive.

Oil and Natural Gas Corporation (ONGC), the country's most profitable public sector company, was planning to invest Rs 5,000 crore in mutual funds. The company had asked the petroleum ministry's permission late last year, but is still awaiting the green signal.

"We will be very cautious about investing in anything that is linked to equity," said ONGC chairman and managing director RS Sharma. ONGC has reserves of around Rs 19,000 crore, while Oil India, another oil exploration company, has around Rs 7,600 crore. ONGC currently invests in fixed deposits, where returns are around 9 per cent.

"We can only invest in mutual funds if the returns are around 12-13 per cent," an ONGC executive said. ONGC, GAIL India, OIL and NTPC are not keen either about investing their surplus money in equity-linked mutual funds.

OIL had also sent its proposal to the petroleum ministry for investing nearly Rs 2,000 crore in mutual funds early this year.

"We have not been following up our proposal with the petroleum ministry. We will not invest at the moment," said a top company executive.

Power utility company NTPC had reserves and surplus of around Rs 40,350 crore as on March 2007, and 30 per cent of this works out to Rs 12,150 crore.