Mixed fortunes for divested PSUs

The financial performance of public sector undertakings (PSUs) privatised under the Bharatiya Janata Party-led National Democratic Alliance regime in 2002-03 and 2003-04 has been a mixed bag.

While Bharat Aluminium (Balco), CMC, Hindustan Zinc, Indian Petrochemicals Corporation Ltd (IPCL) and Maruti Udyog did well post-privatisation, VSNL, Paradeep Phosphates, Hindustan Teleprinters and Jessop didn't do all that well after privatisation.

The government privatised 12 companies during the last three years by selling controlling or strategic stakes to the private sector. The combined sales of these companies in 2000-01 was around Rs 26,953, with net profits of Rs 1,788 crore.

By 2002-03, the aggregate sales moved up to Rs 28,348 crore, but net profits plunged to Rs 1,140 crore. The big drop was mainly because of VSNL, which lost its monopoly status in international telephony just after privatisation. It's post-tax profits dropped from Rs 1,407 crore to Rs 779 crore.

IPCL and Maruti Udyog did extremely well post-privatisation. Maruti, in particular, saw its stock value soaring four-fold from the divestment price of Rs 125 to over Rs 500 in April 2004.

Maruti's net profit too rose more than five-fold from Rs 104.5 crore in 2001-02 to Rs 542 crore in 2003-04. In this it was helped by buoyancy in the auto demand cycle.

Tata Motors, Maruti's key competitor in the car segment, also saw a turnaround in 2002-03 and consolidated further by posting a huge net profit of Rs 810 crore in 2003-04.

IPCL returned to the black in 2002-03, posting a net of Rs 273 crore after a net loss of Rs 39.51 crore in 2001-02.

One reason for the turnaround was the consolidation that happened in the domestic petrochemicals industry, with arch-rival and formidable competitor Reliance Industries being the buyer.

Despite the turnaround, IPCL's share price remained subdued at around Rs 146 as on June 3 against a disinvestment price of Rs 231 per share.

CMC managed a steady rise in net profit post-privatisation, with net profit moving up from Rs 33.05 crore in 2001-02 to Rs 44.77 crore in 2003-04.

During the same period, its sales took a quantum jump from Rs 552 crore to Rs 802 crore. The market value of the stock perked up after the share purchase agreement (SPA) for CMC was signed with Tata Sons after privatisation. TSL, which paid Rs 152 crore to the government for a 51 per cent stake, saw its value more than double to Rs 365 crore in two-and-a-half years.

Sterlite Industries acquired a 64.92 per cent stake in Hindustan Zinc (HZL) for Rs 769 crore. The current value of this stake is Rs 2,211 crore.

The upturn in the commodity cycle played a stellar role in this rerating of HZL, with the company's profits more than doubling to Rs 142.15 crore in 2002-03 from Rs 67.96 crore in 2001-02.

In the nine months to December, 2003, HZL's net profits soared to Rs 318.70 crore. Bharat Aluminium posted good results, with profits of Rs 64.48 crore in 2002-03 against Rs 18.75 crore in 2001-02.

Hindustan Lever turned around Modern Foods during the year ended December, 2003, while Hindustan Teleprinters achieved a turnover of Rs 70 crore in the first five months of 2003-04, with the order-book position bulging at Rs 208 crore as at August 31, 2003.