Nov 6, 2009|
PSUs to bring cheer to investors
The Indian government yesterday took a big step towards firming up the divestment plans for PSUs. And for a change, it was also very specific about its plans in this direction. Yesterday's announcement saw the government make it mandatory for at least 10% of the equity of all profit-making public sector firms to be held by the public. Further, all unlisted PSUs that meet the following three criteria will have to opt for listing on the stock exchanges by divesting similar amounts
* The ones that have a positive net worth,
The cabinet proposal has also suspended the rules governing the use of divestment proceeds for a three year period beginning April 2009.
* No accumulated losses and
* Have had a positive bottomline for three consecutive years.
As per reports, there are in all about 44 listed public sector entities. Out of this 9 have a government holding of over 90%. After yesterday's announcement of a minimum of 10% that should be in the hands of the public, the government will have to compulsorily divest its excess stake in these. This itself is estimated to fetch it about Rs 255 bn at yesterday's closing prices. The funds raised through divestment of unlisted PSUs will be over and above this.
What makes this significant for India is that this will help the government to some extent alleviate its precarious position as far as the fiscal deficit is concerned. The fiscal deficit is estimated to be Rs 4 trillion for FY10, which would stack up to a huge 6.8% of the GDP for the year. This would make the situation, which has been rather tricky to handle due to the stimulus measures that the government has been doling out to assuage the effects of the global financial crisis, even graver.
For the government, this move will help it fund its increased level of expenditure without resorting to a higher level of borrowings and ease the resultant crowding out of funds for the private sector.
For investors, this move means that they will now get to own a larger share of many profitable PSUs to which they did not have access to earlier. And as we have seen, with the kind of stability and growth that PSUs have seen even in the times of crisis, this should surely bring a smile on their face. This smile was more than evident from yesterday's last minute sudden recovery in the markets post the above announcement.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 17, 2017
Mr Trump is in the White House and the gods are in their heavens; what's not to like?
Aug 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Aug 16, 2017
And what it has in common with beating the stock market too.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407