Tag: Indian PSUs

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M&M to Fully Acquire Agri-Tech Firm MITRA – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

M&M buys out VC firm Omnivore’s stake to acquire agri-tech firm MITRA

Mahindra & Mahindra (M&M) has acquired agro-equipment maker MITRA Agro Equipments after buying out venture capital firm Omnivore’s stake in the company. The move comes in line with M&M’s strategy to grow its revenues from the farm machinery segment 10-fold within the next five years. M&M Farm Equipment Sector has signed definitive documents to raise its shareholding in MITRA Agro Equipment from 47.33% to 100%, making it a wholly-owned subsidiary of M&M.

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SC declines to stay NCLAT order to hold second round of auction for Reliance Cap assets

The Supreme Court has declined to stay the National Company Law Appellate Tribunal’s (NCLAT) order to hold a second round of auction for Reliance Captial’s assets. A bench comprising Justices Sanjiv Khanna M.M. Sundresh declined to entertain Torrent Group’s contention seeking a stay on the NCLAT order and issued notice on its plea and fixed the matter for further hearing in August. 

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Smart prepaid meters to reduce power bills by up to 2.5%

Union Power Minister R K Singh has urged electricity consumers to use smart prepaid meters as the device helps users bring down power costs by up to 2%. Installation of smart prepaid meters reduces the operational and finance cost for electricity suppliers as consumers credit their accounts in advance.

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JSPL gets approval to manufacture India’s first fire-resistant steel structures

Jindal Steel and Power Ltd (JSPL) will manufacture India’s first fire-resistant steel structures at its unit in Raigarh, Chhatisgarh. With the production of a special steel item for the first time in India, the company will target segments like refineries, bridges, metro projects, industrial structures, steel, power plants, hospitals, commercial and residential buildings. The grade is being imported at present.

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India’s domestic air passenger traffic grew to 1.20 crore in Feb 2023: DGCA

India’s domestic air passenger traffic grew 56.82% year-on-year (YoY) to 1.20 crore in February as per the data released by the Directorate General of Civil Aviation (DGCA). All domestic carriers together had flown a total of 76.96 lakh passengers on local routes in February 2022. IndiGo led the rally by flying 67.42 lakh passengers during the previous month, securing 55.9 % of the total domestic passenger traffic in February 2023.

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Sterling & Wilson Renewable Energy bags order worth Rs 2,100 crore from NTPC REL

Sterling & Wilson Renewable Energy Ltd (SWRE) has emerged as the successful bidder for the balance of system (BOS) package comprising 4 blocks of 300MW each in the proposed 1200 MW Solar PV Project of NTPC Renewable Energy Ltd at Khavda RE Power Park in Rann of Kutch, Gujarat. The aggregate capacity is 1500 MW (DC). The total bid value, including operation and maintenance (O&M) for three years, would be Rs 2,100 crore.

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Godawari Power & Ispat approves Rs 250 crore share buyback via tender offer route

Godawari Power & Ispat has approved a buyback of equity shares worth Rs 250 crore at its board meeting held on Saturday. The company will buy back up to 50 lakh equity shares, which represents 3.66% of the total number of paid-up equity share capital of a face value of Rs 5 each. The buyback price has been set at Rs 500 per share, which is a 28.2% premium to Friday’s closing price. The buyback will be done through the tender offer route. The record date for the same has been set as March 31, 2023.

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PSU banks’ gross NPA declines from 14.6% in Mar 2018 to 5.53% in Dec 2022

The gross non-performing assets (NPA) ratio of public sector undertaking (PSU) banks has declined from the peak of 14.6% in March 2018 to 5.53% in December 2022 following various reforms by the government. All PSU banks are in profit, with aggregate profit being Rs 66,543 crore in 2021-22. This has further increased to Rs 70,167 crore in the first nine months of the current financial year (FY24), according to the  Minister of State for Finance Bhagwat K Karad.

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Cochin Shipyard wins Rs 550 crore overseas order

Cochin Shipyard Ltd has received an international order of Rs 550 crore from Norway-based global logistics solution provider Samskip Group. The order is for the design and construction of two Zero Emission Feeder Container Vessels. The total project cost for the order is approximately Rs 550 crore and the first vessel is to be delivered in 28 months and the second within 34 months. 

Read more here.

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Market News Top 10 News

Union Budget 2023-24 Presented in Parliament – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Union Budget 2023-24 presented in Parliament

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament today. She announced that there will be no tax on income of up to ₹7 lakh a year (up from ₹5 lakh earlier). The Central government will spend ₹10 lakh crore on long-term capital expenditure (capex) in FY2023-24 to enhance growth potential & job creation and boost private investments. The Finance Ministry allocated ₹2.40 lakh crore to Indian Railways, the largest capital outlay for railways to date. 

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India’s manufacturing PMI rises to 3-month low in Jan

India’s manufacturing sector fell to a three-month low in January 2023 as production slowed and total output fell. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) stood at 55.4 in Jan, compared to 57.8 in December. The domestic market was the main source of new business growth as international sales rose only slightly in January. 

PMI is a month-on-month calculation, and a value above 50 represents an expansion compared to the previous month.  

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Total investment by power PSUs to rise nearly 15% to ₹60,805 crore in FY24

The Indian government has proposed to increase total investment by its eight state-owned power companies by about 15%, taking the total investment to ₹60,805 crore for FY24. NHPC witnessed the highest increase in investment to ₹10,857 crore in 2023-24, from a revised estimate of ₹7,128 crore for FY23. Investment by SJVN has been hiked to ₹10,000 crore for FY24, from the revised budget estimates of ₹8,000 crore in FY23.

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Powergrid Q3 Results: Net profit rises 10% YoY to ₹3,702 crore

Power Grid Corporation of India reported a 10.5% YoY increase in net profit to ₹3,701.72 crore for the quarter ended December (Q3 FY23). The power company’s revenue from operations grew 7.4% YoY to ₹10,746.4 crore during the same period. EBITDA stood at ₹9,380 crores in Q3, up 9% YoY. The company’s board has declared an interim dividend of ₹5 per share for the current financial year (FY23).

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Govt receives bids for 32 mines in 6th round of commercial coal auction

The government has received bids for 32 mines in the technical round of the sixth round of commercial coal auction that had offered 133 coal and lignite mines. A total of 86 bids were received against the 32 coal mines. NTPC Ltd, Jindal Power Ltd, Jindal Steel & Power Ltd, Vedanta Ltd, JSW Steel Ltd, NLC India Ltd, Dalmia Cement, Shree Cement, Ultratech Cement, and Ambuja Cement were among the 56 companies that submitted the bids.

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Jubilant FoodWorks Q3 Results: Net profit falls 36% YoY to ₹88 crore

Jubilant FoodWorks reported a 36% YoY decline in net profit to ₹88 crore for the quarter ended December (Q3 FY23). Its revenue from operations rose 10% YoY to ₹1,316 crore during the same period. ​​The company opened 64 new stores in Q3, resulting in a network of 1,814 stores across all brands (Dominos India, Dunkin Donuts). The performance decline was mainly due to high inflation.

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Britannia Q3 Results: Net profit jumps 151% YoY to ₹932 crore

Britannia Ltd reported a 151% YoY jump in consolidated net profit to ₹932 crore for the quarter ended December (Q3 FY23). Its revenue from operations rose 16% YoY to ₹4,101 crore during the same period. The net profit included an exceptional gain of ₹359 crore due to a joint venture with Bel SA and the consequent sale of a 49% equity stake in its subsidiary (Britannia Dairy).

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Auto sales data for Jan 2022: Highlights  

Maruti Suzuki India posted a 12% year-on-year (YoY) increase in wholesale sales to 1.72 lakh units in Jan 2023. Sales of its mini and compact vehicle segment rose 10.2% YoY to 99,286 units. Exports fell 3% YoY to 17,393 units.

Tata Motors Ltd registered an 18% YoY increase in passenger vehicle sales to 48,289 units in Jan. The automaker’s commercial vehicle sales fell 7% YoY to 32,780 units.

Mahindra & Mahindra’s total passenger vehicle segment posted total sales of 33,040 units in Jan, an increase of 65% YoY. M&M’s tractor sales rose 28% YoY to 28,926 units. 

TVS Motor Company’s total sales stood at 2.75 lakh units in Jan, up 3% YoY. Meanwhile, Bajaj Auto’s sales fell 21% YoY to 2.85 lakh units.

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Editorial

Is Privatisation of PSUs Worth It?

Privatisation in India began with some major policy changes in 1991 by the P. V. Narasimha Rao-led government and its LPG(Liberalization, Privatisation, and Globalisation) policy. India witnessed a trajectory in growth after that. Fast forward to 2020, there is a need for further privatisation in certain sectors. In a webinar organized by DIPAM or the Department of Investment and Public Asset Management (DIPAM), Prime Minister Narendra Modi pitched saying “Government has no business to be in business, and businesses have no business to be in the Government.” He went on batting for the privatisation of strategically important public sector companies.

Essentially the government will be selling stakes or divesting from certain companies it feels are inefficiently managed or an added burden to the central government ledger. Privatisation as of now is in its infancy. There were reports that a total of 300 PSUs could shrink to around two-dozen after privatisation and divestment. Why does the centre feel that privatisation is necessary? What can be the consequences of privatisation? Let’s get right into it. 

Why Are PSUs Privatised?

Governments might privatise certain companies to:

  • To generate revenue. 
  • Desire a higher level of service.
  • Get necessary expertise which otherwise might not be available.
  • Allow flexibility in the functioning of the company.
  • Increase competition in a certain sector and invite other private players into it.
  • Reduce debt burden in distressed companies like the national carrier Air India.

In the private sector, employees have incentives to perform better and therefore have their skin in the game. Otherwise, the government employees get a fixed salary irrespective of performance. Due to administrative inefficiencies, public enterprises might not be able to import the necessary technology needed for their functioning. Private players on the other hand will have a lobby to ensure that the right technology is availed. They will also ensure that political interference does not impact business performance. 

Private companies also have the interests of multiple individuals at stake. This interest or stake in the company ensures that any mishappening in the company is corrected. In the public sector, this lack of interest fails to mitigate any mismanagement. In the past, it was seen that public sector banks like SBI or PNB were more exposed to financial fraud and high levels of NPAs. On the other hand, private sector banks have high expertise in credit-management, risk-management, and a more efficient loan recovery system.

DIPAM, and How Privatisation Works

The Department of Disinvestment was renamed as the Department of Investment and Public Asset Management (DIPAM) on 14th April 2016. It is a department under the Ministry of Finance. 

Department of Investment and Public Asset Management (DIPAM) deals with all matters relating to the management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings. DIPAM works in these four areas: 

  • Strategic Disinvestment 
  • Minority Stake Sales 
  • Asset Monetisation
  • Capital Restructuring. 

It also deals with all matters relating to the sale of Central Government equity through an offer for sale or private placement or any other model in the erstwhile Central Public Sector Undertakings. DIPAM and NITI AAYOG together will decide a number of companies to be privatised.

The Impact

PM Modi in his speech said that the government holds underutilized assets worth Rs 2.5 crores. Privatisation might help use these assets efficiently. The Modi government has been emphasizing the privatisation of government entities ever since it came to power for the first time in 2014. 

MALCO, Modern Foods, Hindustan Zinc, Bharat Aluminium, Maruti, Jessop and Co, CMC Ltd are some of the popular companies that were owned by the Government of India and were later privatised. 

Hindustan Zinc was one such company whose majority stake was sold to Vedanta Limited. The company went on in becoming the world’s second-largest Zinc-mining company and one of the top 10 silver producers of silver.

For some period of time, Maruti Suzuki was a government-owned company. It faced a lot of political conflicts, violent workers union protest, political intervention, quality issues, production issues, and much more. Eventually, the company ended up getting privatised and Suzuki later became the majority stakeholder in the company. 

Bharat Aluminium Company is also another such privatised company. Before privatisation, only 50% of the revenue came from profits, the rest came from interest earned over fixed deposits. It was a wholly government-owned company till 2001 when it was sold to Vedanta. What followed was huge protests between supporters and opposers of privatisation. Yet, the company’s revenue rose from Rs 898 crore in FY2001 to Rs 90,000 crores in FY2018. The company made alloys for “Intermediate-Range Ballistic Missile” – Agni and “Surface Missile” – Prithvi.

Future of Privatisation

It’s clear, only a few companies have been privatised so far, but most of them have shown good results. However, the financial and structural condition of some of the state-owned companies like Air India is so bad that private companies refuse to bid for them. The government has been showing quite an inclination towards privatisation. In a historic move, coal mines are going to be privatised, which will transform India’s trajectory in a HUGE way. 

The current Policy For Strategic Divestment states that all sectors in the public domain will be privatised except for 4 strategic sectors. These include Railways, Department of Posts, Airports Authority of India and some major port trusts. Privatisation will definitely have its own devilish impacts. It will give control of public companies in the hands of private players who would forward their own personal interests rather than that of the public.

 There will be lots of restructuring that these public sector companies would require in order to function efficiently, there will be layoffs, wages will be incentivized, benefits will be cut. All in all, theoretically it will be for a greater public good. Let us see if the country can make this theory practical.

Categories
Editorial

What is a Navratna PSU? Elgibility and Benefits

Since independence, India has been an agrarian country. Till the late 1990s, it failed to develop its industrial base and give special focus to infrastructure facilities. The government soon realised that there is a need to make public investments to boost the economy. 

According to ownership, the government companies are commonly classified into the followinng categories:

  • State Level Public Enterprises (SLPE) – Companies where the direct holding of the State Government or other SLPEs is 51% or more.
  • Public Sector Banks (PSB) – Banks where the direct holding of the Central/State Government or other PSBs is 51% or more.
  • Central Public Sector Enterprises (CPSE) – Companies where the direct holding of the Government of India or other CPSEs is 51% or more.

The central government of India allots special status to public companies to enhance their reputation. There are 3 special statuses which are bestowed to these SLPEs/ PSBs/ CPSEs if they meet certain criteria.

  • The Maharatnas
  • The Navratnas
  • The Miniratnas (I and II)

Let us read all about Navratna companies today.

Eligibility Criteria for Navratna status

  1. A PSU (Public Sector Undertaking) should fall under the Miniratna category. Being a Miniratna company is not that hard. Any government company having made profits continuously for the last three years or earned a net profit of ₹30 crore or more in one of the three years qualifies to be Miniratna-I company. A Miniratna-II company needs to make profits for three years and have a positive net worth.
  2. It should have obtained a rating of ‘very good’ or ‘excellent’ rating in 3 of the last 5 years under the Memorandum of Understanding(MoU) system. This shows that the company is dependable.
  3. The company should have a composite score of 60 or above out of 100 in the following six selected parameters:
ParameterMaximum Weight
Earnings per share10
Profit before interest and taxes (PBIT) to turnover15
Net profit to net worth25
Profit before depreciation, interest and taxes (EBIDTA) to capital employed15
Manpower cost to total cost of production/services15
Inter-Sectoral performance20

List of Navratna companies

  1. Bharat Electronics Limited: BEL designs, develops and manufactures a range of advanced electronic products for the Indian Armed Forces. A few of the products are the weapon locating model, battlefield surveillance radar, electronic voting machines, tank electronics.
  2. Container Corporation of India Limited: CONCOR comes under the Indian Ministry of Railways. It has three activities in its core business which are a cargo carrier, a terminal operator, and a warehouse operator.
  3. Engineers India Limited: EIL comes under the Ministry of Petroleum and Natural Gas. It helps by providing engineering and related technical services for petroleum refineries. Over the years, it has expanded in business from hydrocarbon chain to metallurgy, infrastructure & power.
  4. Hindustan Aeronautics Limited: HAL comes under the Indian Ministry of Defence. It is involved in designing and assembling aircraft, jet engines, helicopters and their spare parts.
  5. Mahanagar Telephone Nigam Limited: MTNL is one of the most famous telecommunications service providers.
  6. National Aluminium Company Limited: NALCO comes under the Ministry of Mines. It has diversified its operations across mining, metal and power.
  7. NBCC (India) Limited: The company is focussed on three fields PMC (Project Management Consultancy), EPC (Engineering Procurement & Construction) & RE (Real Estate).
  8. NMDC Limited: NDMC comes under the Ministry of Steel. It is India’s largest iron ore producer & exporter and also explores copper, rock phosphate and limestone.
  9. NLC India Limited: It operates in the fossil fuel mining sector and thermal power generation. 
  10. Oil India Limited: OIL is present in the business of exploration, development and transportation of crude oil and natural gas. 
  11. Power Finance Corporation Limited: It is the largest NBFC (Non-Banking Financial Corporation) by net worth (all reserves) in India. It helps by providing financial assistance to power projects across the country.
  12. Rashtriya Ispat Nigam Limited: RINL comes under the Ministry of Steel. Its customers include different industrial users, retailers, specific project customers, etc.
  13. Rural Electrification Corporation Limited: REC was incorporated in 1969 and works under the Ministry of Power. It is a public infrastructure finance company which finance projects in the power sector.
  14. Shipping Corporation of India Limited: It came into existence with the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Incorporated in 1961, today it is the largest Indian shipping Company.

Why Become a Navratna Company?

When a company achieves Navratna status, it gets enhanced financial and operational freedom and empowers it to invest up to Rs 1,000 crore or 15% of their net worth on a single project without seeking government approval. They will also have the freedom to enter joint ventures, form alliances and float subsidiaries abroad. So definitely it is a very coveted title, and the benefits may push more Public Sector Enterprises(PSEs) to perform better and make profits. Next day, we can learn about the next level which are Maharatna companies. Till then, have a great weekend!