Tag: PSUs

PSU Explainer – What are Miniratna, Navratna and Maharatna companies

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s central public sector enterprises (CPSEs) are classified into three major categories – Miniratna, Navratna and Maharatna CPSEs.

The main aim of assigning the “ratna” statuses to various CPSEs was to give operational freedom and decision-making power to the state-run entities. The CPSEs can decide on certain matters such as investment and new projects without approaching the government until a particular threshold.

As of last Friday, there were 57 Miniratna, 16 Navratna and 13 Maharatna companies. IREDA, then become the 17th Navratna company after being granted that status. The management of IREDA told CNBC-TV18 that it intends to now become a “Maharatna” company going forward.

Here’s how India’s CPSEs are classified:

Miniratna Status

CPSEs are put in two sub-categories under the Miniratna status – Miniratna-I and Miniratna – II.

Miniratna Category-I status

CPSEs which reported profits in three consecutive years, have a pre-tax profit of ₹30 crore or more in at least one of the three years, and have a positive net worth are classified as a Miniratna-I PSU.

Miniratna Category-II status

PSUs with a profit for the last three successive years and have a positive net worth are classified as Miniratna-II companies.

In addition to these conditions, a CPSE should have not defaulted on repayment of loans or interest due to the government. Also, Miniratna entities need not depend upon budgetary support or government guarantees.

Navratna status

PSUs that have a Miniratna-I status and have obtained an “Excellent” or “Very Good” MoU rating in three out of the last five years and have a composite score of 60 or more in six selected performance indicators are eligible to be considered for a “Navratna” upgrade. These are the six parameters:

• Net Profit to Net Worth
• Manpower Cost to Total Cost of Production
• PBDIT to Capital Employed
• PBIT To Turnover
• Earnings Per Share
• Inter-Sectoral Performance

Some of the PSUs currently classified under the “Navratna” category including IREDA are BEL, CONCOR, Hindustan Aeronautics, NALCO, NBCC, NMDC, PFC among others.

Maharatna status

A PSU is eligible for being granted a “Maharatna” status, in case it meets the following criteria:

• Should have a “Navratna” status
• Should be listed on the Indian stock exchanges
• Should be compliant with minimum shareholding norms
• Average annual turnover of more than ₹25,000 crore and average annual net worth of over ₹15,000 crore in the last three years
• Average annual net profit of over ₹5,000 crore in the last three years along with significant global presence.

BHEL, BPCL, Coal India, GAIL, HPCL, Indian Oil, NTPC, ONGC are some of the Maharatna PSUs.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PSU stocks contribute almost half to the BSE’s market capitalisation erosion on Wednesday

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Public sector undertaking (PSU) stocks bore the brunt of broader sell-off on Wednesday, March 13, with the Nifty PSE index plunging as much as 6.7% —marking its biggest single-day fall since March 2020. What’s more! The broader sell-off also saw the PSU basket losing nearly ₹6.5 lakh crore of investor wealth. That compares with 13.5 lakh crore erosion seen by all listed companies on the BSE.

In fact, the PSE index has been falling for the last five sessions, with a cumulative loss of close to 10%. During the same period, the aggregate market capitalisation of PSU stocks has come off by a whopping ₹10.3 lakh crore. To be sure, the index had gained close to 70% in about four months through March 5, to hit a record high of 9666.55 points.

In absolute terms, insurance behemoth Life Insurance Corporation lost the most. While the insurer witnessed a market cap erosion of ₹48,386 crore, NTPC lost close to ₹22000 crore in Wednesday’s trade. Other PSUs like Bharat Electronics, Power Finance Corporation, State Bank of India, IOCL, Hindustan Aeronautics, IRFC, ONGC, Power Grid Corporation and Coal India also witnessed market cap erosion anywhere between ₹10,000 crore to ₹20,000 crore.

While shares of RailTel Corporation tested their lower circuit of 20% on Wednesday, the stock of Rites plummeted 16%. Additionally, all listed PSUs ended the day in red with as many as 20 PSUs plunging at least 10% each.

The availability of lower number of shares for trade made the fall in PSU stocks much deeper. For instance, the government held 96.5% in LIC of India as of December 2023. Similarly, 86.4% of IRFC and 88.6% of MRPL are held by the promoter. The government’s holding in Mazagon Dock Shipbuilders stood at 84.8% as of December end.

Market participants expect similar corrections to persist, considering the considerable excess that has been built into certain segments of small caps. Nilesh Shah of Kotak Mahindra AMC is of the opinion that the fall may be extended in stocks where promoter holdings is high. “The correction to persist for a bit longer in stocks with low free float,” said Shah.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mutual Funds exit PSUs like SJVN, IRCON in February, increase stake in PFC, IRCTC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s Mutual Funds exited their positions in five state-run companies – SJVN Ltd. Bank of Baroda Ltd., SAIL Ltd., RITES Ltd. and IRCON International Ltd., according to a note by Nuvama Alternative & Quantitative Research.

Some funds also pared their existing positions in PSUs like NHPC, Oil India and NALCO.

While SBI Mutual Fund has exited stocks like SJVN and Bank of Baroda, Quant MF has exited SJVN, RITES and IRCON. Mutual Funds owned stakes ranging between 0.5% to 8.6% in these names as of December 31, 2023.

Shares of SJVN declined 8% in February and have corrected over 35% from their peak of ₹170. However, shares of Bank of Baroda and RITES had gained between 5% to 7% that month.

ICICI Prudential MF, while exiting some PSUs has also trimmed its existing positions in stocks like NHPC and Oil India. On the other hand, SBI MF has pared its stake in NALCO. Based on the December shareholding pattern, the SBI Arbitrage Opportunities Fund had a 3.65% stake in NALCO.

While SBI and Quant MF have exited certain PSUs, they have also bought fresh stake in state-run companies like PFC, Bharat Electronics and Container Corporation. Other funds have also purchased stake in PSUs during February.

In the above list, barring PFC and IRCTC, which declined 9.6% and 5.1% respectively in February, the other four names saw gains ranging from 10% to as high as 30% in the case of Oil India that month.

While these count as new purchases, Mutual Funds have also topped up their exposure in certain PSU names. Stocks like BHEL, BPCL, and PFC have seen fund houses park money in February.

The Nifty PSE index is trading with losses of over 2% in Wednesday’s trading session. All 20 constituents of the index are trading with losses. The index has corrected 7.3% from its peak of 9,731 which it hit last week.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Alchemy Cap’s Hiren Ved sees significant growth potential in this segment

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The organised retailing space in India is still in its nascent stages and there is room for significant growth for companies that can execute well, says Hiren Ved, Director and CIO of Alchemy Capital Management.

Discussing the stellar stock performance of one such company, Trent , Ved, who manages ₹7,260 crore in funds said, “Trent has out executed everybody in the space. But I think the runway for Zudio and other formats is still significantly large, given the size and scale of our country.”

At the end of 2023, Trent’s portfolio included 223 Westside, 411 Zudio, and 27 stores across other lifestyle concepts .

Shares of the Tata Group retail arm have close to doubled over the past six months.

Ved noted that very few apparel retailers have really hit it big in that sweet value spot. While the low ticket consumption in India has been struggling, the value fashion segment that Trent has executed via the Zudio format, has been extremely successful.

On the flip side, Ved pointed out, retailing is an extremely focused oriented business with thin margins. This means the execution has to be top class.

Currently, there aren’t too many other companies in the sector that have been able to execute as well as Trent, he said advising caution.

Ved also discussed other sectors that he is positive on.

While public sector undertakings (PSUs) have been the leaders of this bull market, he advises a selective approach now.

Brokerage firm Kotak Institutional Equities also recently advised investors to exit their PSU holdings and not get carried away with the rally in these stocks. “We would recommend investors to use the rally in PSU stocks to exit most of their positions,” the note said.

Kotak believes that the government’s benign policies and regulations may benefit PSU stocks in the short-term, but prevent them from addressing the large disruption threats to their business models in the medium-term.

Also Read | Are PSU stocks an attractive bet post the recent sell-off?

Real estate, Ved believes, has a long way to go with intermittent bouts of correction.

Among other sectors, Ved is positive on real estate and tourism. He prefers hotels more than aviation. “Our exposure is to Indian Hotels,” he said.

For more, watch the accompanying video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Andrew Holland bullish on these sectors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Andrew Holland, Chief Executive Officer, Avendus Alternate Strategies continues to remain bullish on the travel and tourism sector. He believes international travel into India is yet to reach the pre-COVID levels. “I expect this sector to witness high growth,” he said in an interview with CNBC-TV18.

According to him, the overall auto sector could have been a bit of a laggard in recent weeks because of slowing consumption and competitive negatives around electric vehicles (EVs). “It’s probably going to be one of those rotational moves into autos away from some of the other sectors, which have done well. We saw a few months ago IT doing well, the headwinds are still there for the sector,” he said.

Sharing his views on banking space, he said, if the narrative changes and the interest rates are coming down and bond yields are going to fall below 7%, the banks will do well.

One pocket that has been the highlight of the year gone by, even the start of this year, and continues to remain a major talking point in every market conversation is the public sector undertakings (PSUs).

He is a bit more skeptical about the overall broad-brushed approach of governance in all PSUs. According to him, government spending will continue to be increased very significantly in the defence sector.

Therefore, PSUs within defence sector – if one believes in the long-term future then – are the companies one would have to buy. “So I’m not concerned on that, but I’m not playing into this governance has changed and therefore, we should give it higher ratings,” he said.

India’s top court, responding to a public interest litigation filed by a nongovernmental organization (NGO), has given the government a month to fix standard rates for different medical procedures. Private healthcare heads now fear an ‘armageddon’ if rates similar to Central Government Health Scheme (CGHS) are mandated to be applied to procedures in private hospitals.

Andrew believes it is still a long way from what’s going to happen here. It is difficult to take a reasonable call. He further believes that the ratings of these stocks were very high. And it doesn’t take a lot to knock it down with any kind of negative news. “I’m sure it will play out as the Armageddon story but obviously when you have very highly valued companies, there’s not much margin for any kind of negative, which could hurt the earnings,” he said.

He would sit on the sidelines as he isn’t in the hospital stocks, he further mentioned.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PSU stocks contribute a third to the overall market cap erosion on Tuesday

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Public sector stocks — the frontrunner of latest bull rally — contributed nearly a third to the overall market cap erosion on Tuesday, January 23. The combined market valuation of all listed PSUs as of Tuesday’s close stood at close to ₹57 lakh crore, which is a fall of ₹2.5 lakh crore from Saturday’s close.

In comparison, the aggregate market capitalisation of companies listed on the BSE slid ₹7.6 lakh crore to ₹366 lakh crore.

The BSE PSU index, which tracks 56 major public sector undertakings, dropped as much as 4.5% in Tuesday’s trade after investors chose to book some profit following a breathtaking rally, which also had seen the state-owned firms market valuation surge to nearly ₹60 lakh crore.  

While the benchmark Sensex slid 1.5% on Tuesday, the BSE Midcap and Smallcap fell 3% and 2.8%, respectively 

LIC – the largest state-owned firm by market capitalisation lost the most with a market cap erosion of ₹38962 crore, that was followed by State Bank of India, with a market cap loss of ₹23,472 crore.

Others PSUs, which lost more than ₹10,000 crore in market capitalisation include Indian Railway Finance Corporation, ONGC, COAL INDIA and IOCL. These four companies along with LIC and SBI saw a market cap erosion to the tune of ₹1.2 lakh crore. 

Both SBI and LIC of India clocked their biggest fall in nearly one year. While the shares of SBI slid 4.2% on Tuesday, the stock of LIC of India declined 6.6%. 

Among the mid and small cap PSU stocks Ircon International, Railtel Corp Of India, Housing and Urban Development Corporation, State Trading Corporation of India and Rites saw their stock prices plunging anywhere between 10%-14% in Tuesday’s trade. 

Barring seven entities, all listed PSUs ended the day in the red. The list include, Petronet LNG, HMT, IFCI and recently listed Indian Renewable Energy Development Agency who could buck the trend with gains ranging between 3.5% to 5.3%. 

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

From IRFC to LIC: Excess government stake in 19 PSUs is now worth ₹2.4 lakh crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Union government can unlock nearly ₹2.4 lakh crore if it plans on monetising its excess stake in over 19 state-run companies ranging from IRFC to Life Insurance Corporation, SJVN and many state-run banks.

Excess stake implies those companies in which government shareholding is more than 75%. Companies, both private and PSUs, need to have promoter shareholding of 75% or less to comply with the Securities and Exchange Board of India’s (SEBI’s) minimum public shareholding norms.

When CNBC-TV18 had last addressed this on September 18, that excess stake was worth nearly ₹1.9 lakh crore. Since then, the rally in PSU stocks has boosted that value by over 26%. When this was first reported by CNBC-TV18 on July 28, that excess stake was worth nearly ₹1.5 lakh crore. From those levels, the value is up by over 60%.

As per CNBC-TV18‘s calculations, the excess stake in 19 companies is now worth ₹2.42 lakh crore as per the price of these companies on January 20. The list does not include MRPL as ONGC and HPCL, not the President of India, are classified as the company’s promoters.

Among these 19 companies, there are nine such firms where the government has a stake of 90% or more.

The excess government stake in India’s largest insurer, LIC is worth nearly ₹1.2 lakh crore as of the current market price.

The government had offloaded only 3.5% in India’s largest IPO in 2022, leaving it with a 96.5% stake. Shares of LIC are currently trading above their retail IPO price after a recent rally, but remain below their original IPO price of ₹949. However, in this case, the government has the opportunity to comply with the minimum public shareholding norms by 2032.

The government still owns more than 75% stake in stocks like Mazagon Dock Shipbuilders and IRFC, which have seen a strong rally through 2023 and continue to enjoy the same in the new year as well. In fact, shares of IRFC have surged 75% in January itself and are now 6x higher than their IPO price of ₹26.

The government still has an excess 11% stake in the railway financier, which in case it plans to offload, will now fetch them a handsome ₹22,500 crore.

“Most of these companies are getting orders and have longevity in a way and cash flows for these companies are also visible, which was absent during the past 7-8 years. So, corporate earnings along with cash flows plus a lot of execution, pickup strength which these companies are exhibiting, I think they are still away to peak out for PSUs,” said Devang Mehta of Spark Capital Management.

The recent rally in PSUs has now taken the overall PSU market capitalisation past the ₹60 lakh crore mark. That figure, at the start of 2023, stood at ₹35 lakh crore.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Oil PSUs record fluctuations in fuel sales in September first fortnight — Petrol soars, diesel, ATF slumps

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Major oil Public Sector Undertakings (PSUs) in India, including Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Limited (BPCL), witnessed notable fluctuations in their fuel sales in the first fortnight of the current month, between September 1-15, 2023.

Petrol sales recorded 8.8 percent month-on-month (MoM) hike reaching 1,289.2 Thousand Metric Tonnes (TMT), compared to 1,184.9 TMT in the previous month.

Diesel sales, however, displayed a somewhat mixed performance. On a month-on-month (MoM) basis, there was a 0.8 percent increase in diesel sales, with volumes rising to 2,724.7 TMT, up from 2,700.8 TMT in the preceding month. While on a Year-on-Year (YoY) basis, diesel sales experienced a decline of 5.8 percent. The sales volume for this period stood at 2,724.5 TMT compared to 2,892.0 TMT in the same period last year. 

In the aviation sector, the Aviation Turbine Fuel (ATF) sales saw a 1.8 percent MoM decrease. The total ATF sales for the period amounted to 292.5 TMT, down from 298.0 TMT in the previous month.

On a positive note, LPG (liquefied petroleum gas) sales exhibited robust growth during the first September fortnight, with a substantial 12.0 percent MoM increase. Total LPG sales reached 1,359.8 TMT, compared to 1,214.4 TMT in the previous month. 

Meanwhile, as per a government notification on Friday, the Indian government increased the windfall tax on crude petroleum to Rs 10,000 per tonne from Rs 6,700 per tonne. The new rates would be effective from Saturday (September 16).

Also, the special additional excise duty (SAED) or duty on the export of diesel will be reduced to Rs 5.50 per litre, from Rs 6 per litre. The duty on Aviation Turbine Fuel (ATF), commonly known as jet fuel, will be reduced to Rs 3.5 per litre from Rs 4 per litre. However, SAED on petrol will continue at nil.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fertiliser stocks rally after report says government planning to divest stake in PSUs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of major fertiliser companies traded in the green on Wednesday after a report said the government has identified eight public sector undertakings (PSUs) within the sector for divestment.

According to a Moneycontrol report published on Tuesday, the eight PSUs identified for the stake sale are Rashtriya Chemicals & Fertilizers (RCF), National Fertilizers (NFL), Brahmaputra Valley Fertilizer Corporation (BVFCL), FCI Aravali Gypsum and Mineral (FAGMIL), Madras Fertilizers (MFL), Fertilizer Corporation India (FCIL), Fertilizers and Chemicals Travancore (FACT), and Hindustan Fertilizer Corporation (HFCL).

The report said that a proposal for the stake sale was discussed in a meeting of the Core Group of Officers headed by NITI Aayog CEO a few days ago. While most members in principle agreed with the plan, the final decision is awaited, it added.

Rashtriya Chemical and Fertilizers settled 1.43 percent higher while National Fertilizers was up 0.77 percent at the close. Gujarat State Fertilizers and Chemicals ended 1.09 percent higher while Chambal Fertilizers and Chemicals is up 0.19 percent.

Fertilizers and Chemical Travancore hit a three-month high of Rs 132 in early trade and settled 1.07 percent higher at Rs 127 per share.

By privatising or closing public sector enterprises in non-strategic sectors such as fertiliser, steel, and tourism, the government intends to exit these sectors.

Under the new Public Sector Enterprises (PSEs) Policy announced by the government in 2020, the fertiliser sector will be the first to be privatised if the government goes ahead with its divestment plans.

Also read: Hindustan Aeronautics at 52-week-high after announcing it assembled gas turbines for INS Vikrant

Last month, the government announced that all subsidised fertilisers including urea and DAP will be sold under the single brand ‘Bharat’ from October, a move aimed at ensuring timely availability of soil nutrients to farmers and reducing the freight subsidy.

Announcing the new initiative ‘One Nation One Fertiliser’ under the fertiliser subsidy scheme ‘Pradhanmantri Bhartiya Janurvarak Pariyojna (PMBJP)’, Chemicals and Fertilisers Minister Mansukh Mandaviya said the companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.

On the remaining space, he said the ‘Bharat’ brand and PMBJP logo will have to be shown. The companies have been given time till year-end to clear their old stock.

In the last financial year, the central government incurred a fertiliser subsidy bill of Rs 1.62 lakh crore. In view of a sharp rise in global prices in the last five to six months, the government’s subsidy bill is estimated to rise to Rs 2.25 lakh crore in the current fiscal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow