ASSOCHAM

New Govt. can raise Rs 1 lakh crore

 by divesting in top 10 PSUs: ASSOCHAM

The new government can easily raise Rs 1 lakh crore by divesting 10 percent or more of stake in top 10 PSUs, including ONGC, Coal India and NTPC to overcome the immediate problems of budgetary revenue in the face of economic slowdown, a study by ASSOCHAM has said.

It said the top 10 PSUs which can be divested to raise rich resources at today’s market capitalisation include ONGC, Coal India, State Bank of India, NTPC, Indian Oil Corporation, NMDC, Power Grid Corporation and BHEL.

The combined market capitalisation of these companies including Bank of Baroda exceeds Rs 11 lakh crore as the market is riding the wave of FIIs inflows built on decisive new government.

“If the results of elections are for stable government, the market capitalization of these companies can easily go up by another 15-20 per cent raising prospects for better realizations for the government from minority divestment,” it said. 

The number one PSU firm in terms of market capitalisation is ONGC with valuation of about Rs 2,87,000 crore followed by Coal India – Rs 1,86,000 crore  and   State Bank of India – Rs 1,55,000 crore, adds the ASSOCHAM paper.

The other companies in the government sector which can fetch the central exchequer a tidy sum include power generating major NTPC – Rs 95,000 crore and  fuel refiner and marketing major Indian Oil Corporation – Rs 66,500 crore.

“The new government should take advantage of robust state of the stock market helped by heavy inflows of the funds from the foreign institutional investors and help its exchequer which faces constraint of lower tax earnings because of slowdown in economy,” ASSOCHAM President Mr Rana Kapoor said.

The government could not realize its divestment target in the financial year 2013-14 because of different reasons, mainly the subdued conditions for most parts of the year. Stretching of resourced had then forced the government to resort to big spending cuts in planned expenditure, which has its own negative implications for economic growth.

The government spending are the major contributor to the country’s GDP accounting for almost one-sixth of the total GDP (at current to prices) and the indirect cascade at a much higher level.

In the recent run-up in the stock market, the top-performing PSUs have been attracting a significant amount of investor interest leading   to improvement in their market capitalisation. For instance, the State Bank of India (SBI) has witnessed a run up from Rs 1400 per share to Rs 2,000 per share in the last few weeks.

“Likewise the market has seen good revival of interest in companies like ONGC, NTPC, BHEL, Indian Oil  Corporation and Coal India…..throwing a good opportunity for the government to divest its stake and raise resources when it needs most,” the ASSOCHAM paper said.  

Besides the top ten, there are other PSUs in the list of top 100 companies by market capitalisation, which can be considered for divestment. These include several banks like Punjab National Bank (PNB), Canara Bank and others such as the SAIL, Power Finance Corporation of India (PFCI) and the Rural Electrification Corporation (REC) .