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?  

A big problem for Indian PSUs
Fri, 15 Jul Pre-Open

As India Inc starts the June quarter reporting season, several companies have claimed that their margins are lower as compared to the previous quarters. The reason for this is salary hikes. Most companies have offered or plan to offer attractive salary increases and bonus packages to their employees. One reason for this is to arrest employee attrition. Another reason is to reward the employees as times have improved since the crisis of 2009. But at such a time one wonders as to what would happen to the compensation of the PSU (public sector undertaking) employees..

There have been several instances wherein employees of Indian PSUs have expressed their woes. At times with regard to lower compensation and at others with regard to threat of job losses. Wide gap in PSU- private sector pay scales, threat of job losses due to privatization and fewer incentives has ailed Indian public sector units for long. Indian banks in particular have been a victim of this. The fact that markets value them at least at 40% discount to private sector peers is reflective of the sentiment.

This is not to suggest that efficiency levels of public sector companies are low. Even if so, they have improved dramatically over the years. Companies like NTPC and SAIL are producing power and steel at cheaper costs than private sector behemoths. The likes of Bank of Baroda and Punjab National Bank have one of the best interest margins amongst Indian banks. The government banks' revenue per employee doubled in the past three years. Of course this is because their manpower grew by 2% while balance sheets grew in excess of 20% over this period. In fact these companies have been the poaching ground of talent for their private sector competitors. That said the low compensation levels in PSUs remains an issue when it comes to retaining the best talent and improving profitability.

Here again PSU banks are set to be the biggest victim. Nearly 80% of middle management and 50% of junior officers in these entities will retire over the next 10 years. The vacancies will require immediate replacement of skilled staff. And attracting that in competition with the private sector will be a heady task for the sector.

Performance linked employee compensation has been a bane of contention in the West. Particularly, after bankers mis-sold risky derivative products to hike profits and pocket dollops of bonuses. Hence short term performance has come to be considered as a bad metric for pay rises. Ironically, even after such learning, the conservative RBI governor has advocated improved pay scales for PSU executives. He believes that will help PSU banks in India remain more profitable.

We agree that competitive pay scales are necessary to sustain efficiency and talent in Indian PSUs. However, arm-twisting the government with strikes and an attempt to match the private sector may not be the best way out.

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 "A big problem for Indian PSUs". Click here!

  

Stock Market Updates

J&K BANK Share Price Up by 8%; BSE BANKEX Index Up 2.8% (Today's Market)

Mar 3, 2021 03:35 PM

J&K BANK share price is trading up by 8% and its current market price is Rs 32. The BSE BANKEX is up by 2.8%. The top gainers in the BSE BANKEX Index are J&K BANK (up 7.6%) and RBL BANK (up 5.2%).

RELIANCE IND. Share Price Up by 5%; BSE OIL & GAS Index Up 1.3% (Today's Market)

Mar 3, 2021 03:27 PM

RELIANCE IND. share price is trading up by 5% and its current market price is Rs 2,216. The BSE OIL & GAS is up by 1.3%. The top gainers in the BSE OIL & GAS Index is RELIANCE IND. (up 5.1%). The top losers are PETRONET LNG (down 0.1%) and BPCL (down 0.4%).

AU SMALL FINANCE BANK at All Time High; BSE BANKEX Index Up 2.8% (Today's Market)

Mar 3, 2021 03:23 PM

AU SMALL FINANCE BANK share price has hit an all time high at Rs 1,224 (up 4.2%). The BSE BANKEX Index is up by 2.8%. Among the top gainers in the BSE BANKEX Index today are AU SMALL FINANCE BANK (up 4.2%) and KOTAK MAHINDRA BANK (up 3.0%).

REDINGTON Share Price Down by 5%; BSE 500 Index Up 1.9% (Today's Market)

Mar 3, 2021 03:13 PM

REDINGTON share price is trading down by 5% and its current market price is Rs 200. The BSE 500 is up by 1.9%. The top gainers in the BSE 500 Index are IFCI (up 19.9%) and IDBI BANK (up 12.1%). The top losers are REDINGTON (down 5.1%) and SYMPHONY (down 5.1%).

RBL BANK Share Price Up by 5%; BSE BANKEX Index Up 2.7% (Today's Market)

Mar 3, 2021 03:09 PM

RBL BANK share price is trading up by 5% and its current market price is Rs 249. The BSE BANKEX is up by 2.7%. The top gainers in the BSE BANKEX Index are RBL BANK (up 5.0%) and FEDERAL BANK (up 5.7%).

Sensex Trades Over 500 Points Higher; Dow Futures Up by 147 Points (Today's Market)

Mar 3, 2021 12:30 pm

BSE Sensex is trading up by 586 points, while the NSE Nifty is trading up by 190 points.

View More Indian Share Market 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

S&P BSE SENSEX


Mar 3, 2021 (Close)

MARKET STATS