Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Should PSUs be buying stake in one another?
Fri, 3 Jan Pre-Open

Failing to stick to its target of bringing the fiscal deficit down to around 4.8% of GDP in FY14, the government is looking at all possible avenues to bridge the gap. The ambitious divestment program was touted to ease considerable pressure off the Centre but with market conditions proving to be volatile, stake sales so far have been a damp squib. The government has so far fetched Rs 13.2 bn as against the budgeted target of Rs 400 bn, with just three months left for the fiscal year to close. And it is in this mounting desperation that the government is now looking to milk the cash rich PSUs.

The government is planning to push state run-firms to buy stakes in each other. Looking at ways to shore up funds to meet the runaway fiscal deficit, cash-surplus public sector companies like National Mineral Development Corporation (NMDC) and Coal India will use a portion of their cash pile to pick up stakes in public sector companies. Through the cross holding route, the government will be able to receive the entire outflow from the PSU's. Unlike special dividends, where there will be some leakage as minority shareholders will also get their due.

According to Crisil, by March 31, 2014, the cash holding of the top 20 PSUs will have an estimated pre-dividend corpus of around Rs 1,600 bn, and the companies are comfortably placed to pay special dividends of Rs 270 bn over and above their normal dividend pay-outs, without impacting their capex plans.

However, pushing PSUs to buy shares of other PSU's is only a short term solution to a more chronic long term problem. More emphasis will have to be laid on streamlining subsidies and cutting down overall non-developmental expenditure, so that there is more headroom to spend on activities that have the potential to contribute to India's GDP growth. Otherwise, the problem of rising fiscal deficit will only keep popping up as a regular thorn on the government's side.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Should PSUs be buying stake in one another?". Click here!

  

Views on News

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

I Believe the Investment of the Year Will Be...

Feb 19, 2021

In this episode, ace trader Brijesh Bhatia talks to us about the best investments of 2021, his profitable trading system, and much more.

The Hidden Tesla in My Great Indian Wealth Project (Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS