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?  

Niti Aayog: Dispose Loss Making PSUs
Fri, 17 Jun Pre-Open

Recently, NITI Aayog, the apex planning body in the country, has given a reform roadmap for state-owned units. Reportedly, NITI Aayog has recommended winding up of 26 loss making public sector units (PSUs) as soon as possible. Further, it has also suggested searching for strategic buyers for some companies like Cement Corporation of India (CCI) and Air India.

Positive news indeed, as these companies are surviving on the hard earned money of the taxpayers. For instance, the Union Budget 2016-17 allocated Rs 250 billion to recapitalize the public sector banks. Further, the government has already poured up to Rs 222.8 billion to keep Air India running. Now, where does this money come from? From us who are burdened with indirect as well as direct taxes.

In certain cases the government is planning to revive some of the public sector units and then go for stake sale in order to fetch a better value. However, in this process they are throwing good money after bad. Vivek Kaul recently wrote an article stating how it is impossible to turnaround companies like Mahanagar Telecom Nigam Ltd (MTNL). Here is his take on the same:

  • Now let's talk about the fundamental problem that the company faces and why the telecom minister Ravi Shanker Prasad, cannot turnaround the company, despite his best intentions. Allow me to explain.

    For the year 2015-2016, the company's income from operations (which does not include its other income) stood at Rs 3,197.40 crore. Of this, Rs 2,310.76 crore went towards employee benefits. A further, Rs 343.68 crore went towards employee benefits for retirement. Hence, of the Rs 3,197.40 crore operational income of the company, a total of Rs 2,654.44 crore went towards employee benefits.

    This basically means that 83% of the company's income from operations went towards meeting employee cost. Airtel's employee cost in 2015-2016 was 3.1% of its income from operations. MTNL's was at 83%.This is what MTNL is competing against.

    Further, given the brand image that the company has among consumers that (the turnaround) seems to be difficult. As they used to say in the good old days when MTNL was a monopoly, MTNL equals Mera Telephone Nahi Lagta. The company had a branding problem back then as well, but the consumer did not have choice. Now he does and he has executed it.

The other example is Air India which has suffered losses to the tune of Rs 346.8 billion between 2010-11 and 2015-16. There has been many times wherein the government has re-capitalized Air India. However, all the money has gone down the drain and the strategy has not worked. Hence, in most of the cases the restructuring has not worked and it's high time the government sells off the un-profitable ventures.

The sale of PSUs will surely attract agitation from the employee unions. However, India is at a stage wherein it cannot afford the unproductivity at public sector enterprises being subsidised by the government. Further, every rupee that goes towards sustaining these companies is taken away from something else. Hence, the decision to sell the PSUs needs to be taken sooner rather than later as the decision is inevitable.

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 "Niti Aayog: Dispose Loss Making PSUs". Click here!

  

Views on News

Beware the Ides of March (Fast Profits Daily)

Mar 1, 2021

The month of March is usually difficult for traders. This time it will be even more so. Find out why in this video.

UTI Nifty200 Momentum 30 Index Fund: Aims to Benefit from Momentum Investing Strategy (Outside View)

Mar 1, 2021

PersonalFN analyses the features of UTI Nifty200 Momentum 30 Index Fund and explains the potential this fund has to offer to its investors.

How to Have a Perfectly Normal Day Even if Sensex Falls 2,000 Points (Profit Hunter)

Mar 1, 2021

How can someone witness a 2,000 point decline on the Sensex and still stay perfectly calm.

ITI Mid-Cap Fund: Investing in Potential Midcap Companies for Growth (Outside View)

Feb 26, 2021

PersonalFN analyses the features of ITI Mid-Cap Fund and explains the potential this fund has to offer to its investors.

NSE Glitch: Why Did the Market Go Up? (Fast Profits Daily)

Feb 26, 2021

In today's video, I'll discuss why thew stock market went up on Wednesday, 24 February 2021, when the NSE had to shut trading due to a technical glitch.

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.

Top 5 Stocks Mutual Funds Bought and Sold in January 2021 (Sector Info)

Feb 16, 2021

A look at what India's top equity mutual funds bought and sold in January 2021.

I Would Recommend this Small-cap Stock Over Tesla (Profit Hunter)

Feb 16, 2021

Do you enjoy reading Tesla and Bitcoin stories? Here's a not so famous small-cap stock to profit from the rise of EVs.

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.

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

S&P BSE SENSEX


Mar 1, 2021 (Close)

MARKET STATS