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Riding on the rally that began last year, the BSE’s total market capitalisation has crossed Rs 100 lakh crore mark. At the end of last week, the value of all companies listed on it was a combined Rs 104.8 lakh crore. Of this, the 65 public sector units were worth Rs 14.26 lakh crore.
Though the broader market, represented by the benchmark Sensex, is 50 per cent above the 2010 highs, the public sector universe is well short of the m-cap high of 15.62 lakh crore at the end of 2010-11 and the Rs 14.62 lakh crore at the end of 2009-10.
“Since 2010, number of public sector units (PSUs) hitting capital markets has fallen drastically compared to private issuers, reasons could largely be attributed to red tapism and business efficiency issues,” remarked Mahavir Lunawat, Group Managing Director, Pantomath Capital.
Typically, in bull markets, the public sector has a tendency to under-perform. The data also shows the share of PSUs had a declining trend during the market rally of 2004-07. BY the end of FY07, the share had fallen to a low of 18.7 per cent.
As a corollary, during the sub-prime crisis and the global financial crisis triggered by the collapse of Lehman Brothers, the public sector stood as preservers of value. When the overall value of the market fell 40 per cent from Rs 51 lakh crore to Rs 31 lakh crore between financial years 2007-08 and 2008-09, the state-owned firms fell less, losing around 27 per cent of their value. This meant the PSU share of the market went up that year to 26.81 per cent.
However, ever since, they have been on a losing streak. One reason for this secular trend has been the increasing supply of government shares in the market, as a result of the disinvestment programme. While bears have benefitted by shorting these shares ahead of big offloading by the government, some genuine rationalisation has also happened in companies such as MMTC and NMDC.
These stocks, which were trading at unreasonable valuations due to miniscule public holding, have come down to earth after the divestment. For example, MMTC had a market cap of Rs 1.56 lakh crore at the end of March 2010. Now, it trades at a valuation of Rs 5,495 crore. NMDC’s value has halved from Rs 1.16 lakh crore to Rs 53,000 crore.
Other big losers, widely held even before the divestment programme, are Steel Authority of India and Bharat Heavy Electricals. SAIL has fallen from Rs 1.04 lakh crore in FY10 to Rs 28,000 crore now. BHEL lost Rs 52,000 crore in m-cap over five years. Such losses have been covered by the listing of Coal India in 2010.
The miner gave the PSU universe a Rs 2.3 lakh crore boost and is the second most valuable public sector company, after Oil and Natural Gas Corporation.
