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

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

  • MyStocks


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

Will this lead to higher valuations for PSUs?
Fri, 26 Oct Pre-Open

It was not too long ago when information technology major Infosys was being hounded and criticized by many on its unutilized cash reserves. While the company continued to expand its war chest, the general concern within the investing community was that of the cash earning lower returns than that of the company's core business, thereby lowering the overall return ratios of the company.

On such situations, investor concerns also include misuse of the cash by the company management. Attempts at diversification or expensive buyouts have often earned minority investors a raw deal. Hence the willingness to rather pocket the cash instead of allowing company management to have it at their disposal.

For a while now, the government has been trying to stoke the growth levels in India. This would be benefiting the government by bringing in higher revenues in the form of taxes. However, with PSUs themselves unwilling to spend excess cash towards projects have dislodged the government's original plans. And the reasons for the PSU chiefs not taking the necessary actions seem to be associated with concerns relating policy inactions, lack of resources, amongst others, leading them to wait before committing funds to project that could have an uncertain future.

Government warnings continue... this time in person

The central government had been warning the PSUs against keeping heavy cash idle on their books for too long. On Tuesday, in its first meeting ever, Prime Minister Manmohan Singh met with the heads of India's 25 cash rich PSUs - asking them to invest or pay out the surplus, which is believed to be amounting to a sum of Rs 2.5 trillion. These companies included industry heavyweights such as Oil and Natural Gas Corporation Ltd. (ONGC), Coal India, Bharat Heavy Electricals (BHEL), National Thermal Power Corporation (NTPC), Steel Authority of India (SAIL) and National Mineral Development Corporation (NMDC).

The government's argument seems simple - either help towards reigniting the economic growth and help in changing the investing sentiments in the country or pay the money to the exchequer in the form of dividends. As per the PM, the country should continue to aim for a growth levels in excess of 8% regardless of what is going on around the world.

Addressing the concerns of the PSUs, Heavy industry minister Praful Patel said that a committee would be formed to look into the concerns of PSUs such as autonomy and regulatory clearances, in addition to the investment of surplus funds. Further, the heads of the PSUs also asked for decisions on foreign acquisitions and takeovers being left entirely to the company's board.

How would investors look at this development?

Given the past experience and how regulations have impacted PSU companies, majority of investors would prefer the option of companies paying out the money in the form of dividends. Having said that, how the scenario would change once (and when) the reforms come into place is any one's guess. While the Congress-led ruling coalition has been on a reform overdrive in recent times, it all boils down to execution of the same.

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 "Will this lead to higher valuations for PSUs?". Click here!


Stock Market Updates

Sensex Trades Marginally Lower, Dow Futures Up by 174 Points (Today's Market)

May 14, 2021 12:30 pm

BSE Sensex is trading down by 29 points, while the NSE Nifty is trading down by 39 points.

Sensex Opens Flat; Asian Paints Rallies 7% Post Q4 Results (Today's Market)

May 14, 2021 09:30 am

Indian share markets open flat. The BSE Sensex opened down by 33 points, while the Nifty is trading lower by 14 points.

ADANI TOTAL GAS Share Price Down by 5%; BSE 500 Index Down 0.1% (Today's Market)

May 14, 2021 09:34 AM

ADANI TOTAL GAS share price is trading down by 5% and its current market price is Rs 1,330. The BSE 500 is down by 0.1%. The top gainers in the BSE 500 Index are ASIAN PAINTS (up 6.7%) and BANK OF INDIA (up 5.7%). The top losers are ADANI TOTAL GAS (down 5.2%) and VINATI ORGANICS (down 7.1%).

JINDAL STEEL & POWER Share Price Down by 5%; BSE METAL Index Down 2.4% (Today's Market)

May 14, 2021 09:32 AM

JINDAL STEEL & POWER share price is trading down by 5% and its current market price is Rs 466. The BSE METAL is down by 2.4%. The top losers are JINDAL STEEL & POWER (down 5.3%) and NMDC (down 5.3%).

BANK OF INDIA Share Price Up by 5%; BSE BANKEX Index Up 0.3% (Today's Market)

May 14, 2021 09:28 AM

BANK OF INDIA share price is trading up by 5% and its current market price is Rs 77. The BSE BANKEX is up by 0.3%. The top gainers in the BSE BANKEX Index is BANK OF INDIA (up 5.2%). The top losers is HDFC BANK (down 0.2%).

GRINDWELL NORTON Share Price Up by 8%; BSE CAPITAL GOODS Index Up 0.4% (Today's Market)

May 14, 2021 09:26 AM

GRINDWELL NORTON share price is trading up by 8% and its current market price is Rs 1,259. The BSE CAPITAL GOODS is up by 0.4%. The top gainers in the BSE CAPITAL GOODS Index is GRINDWELL NORTON (up 7.7%). The top losers are L&T (down 0.3%) and V GUARD INDUSTRIES (down 0.4%).

View More Indian Share Market News

Most Popular

Is Intraday Trading For You?(Fast Profits Daily)

May 13, 2021

Do you think you have what it takes to be an intraday trader? Find out in this video.

My Secret to Find Breakthrough Stocks(Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony?(Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Key to Profit from India's EV Revolution(Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.


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


May 14, 2021 (Close)