LEFT OUT – NOW ONLY RIGHT!

Having unimaginable riches in one’s own coffers but going around begging in the neighborhood, does that make any sense at all? That is precisely how one can explain the current state of the Government. The Public Sector Undertakings (PSUs) are like pots of gold, buried under union litigations, sickness, oppositions and plain lethargy. Yet, if this treasure is unearthed, it could solve all the problems of the country in a jiffy. By selling a miniscule stake, wherein the Govt continues to retain its majority shareholding, the amount of money raised and the kind of valuations which the listed PSU would be able to realise would beat even the top notch private sectors to shame.

The case in question is BSNL. If the company wants to remain in the race, it has no option but to take rapid strides in field of telecom. And to expand, it necessarily needs to raise enough money. And the best possible way is IPO and the company has been toying with the idea of listing for some time now. Yet the employee union of BSNL has shot down the plans twice. But fortunately, the UPA Govt, with now wind in its wings and liberated from the Left has decided to go ahead with the IPO. The proposal is to raise Rs.40,000 crore by diluting a 10% stake in BSNL. That’s the kind of valuation this goldmine of a company has. And that is not all. This gives the company a valuation of Rs.4,00,000 crore, which is $100 billion, making it one of the largest telecom companies of the world. That’s not all. The listing makes the company so huge, that without making any effort, apart from listing the stock, BSNL will be the number one telecom company of India, in terms of valuation. What was the employee union of BSNL thinking while culling the IPO idea?

The Finance Minister is very keen on going ahead with this IPO and it seems all the preparatory work has begun. Amongst that, convincing the trade union would be highest on the priority list. It has also started scouting around for a merchant banker to help it with the IPO. It may take a few months for the IPO to actually hit the markets but as the saying goes – better late than never.

What we have to understand here is that stake sale in BSNL and the various other PSUs is not being made with the objective of privatization. Actually that is very far from the truth as in most of the PSUs where the Govt is planning disinvestment, it is planning to dilute just 5-10% stake and will continue to remain in control, post listing. SBI, Shipping Corporation of India, MMTC, NMDC, RCF, .. the list is endless. So the unions fearing that Govt will lose control and it would become a private sector company is baseless.

The main purpose of the dilution, apart from raising funds, is to whet the appetite of the markets, which now has sky-high expectations after the exit of the Left. More importantly, for the PSUs themselves, listing would create liquidity and help nurture the ambitious plans chalked out for the future. To grow one has to expand and to expand, one needs money, so then what could be a better option than listing? Its debt free, it makes the companies more responsible, creates liquidity, increases visibility, gives a new lease of life and helps the PSUs keep pace with the competition and changing times.

For the Govt, PSU disinvestment is also a major source of generating revenue. If the govt has doled out a largesse of Rs.70,000 crore as debt waiver to the farmers, it needs to also think of ways to fill in that deficit now. The funds generated from PSU sale would certainly go a long way in bringing down the fiscal deficit of the country and thereby improve the entire economic picture of India. The debate can go on and on about why the debt waiver and then why the fiscal deficit but right now, lets accept that these situations are there, are irreversible and we have to look ahead and work our way out of this. Why not PSU disinvestment?

The Govt has kicked off the due diligence for almost 24 PSUs, many of which are to be listed on the bourses over the coming months. It has asked the nodal ministries to submit the required details and the list of PSU lined up for disinvestment is simply lip smacking, making any investor, hungry for investment, salivate just looking at the list!

It has also put on fast-track its plan to divest a 5% stake in mini-ratna companies like MMTC, STC, Neyvelli Lignite Corporation, Bharat Electronics (BEL) and Shipping Corporation of India (SCI) through follow-on public offers (FPOs).

The Govt plans to disinvest at least 10% stake in PSUs like Central Coalfields, Coal India, Mahanadi Coalfields, Cochin Shipyard, Goa Shipyard, Hindustan Aeronautics, Mazgaon Dock, Hindustan Paper, Narmada Hydroelectric, Nuclear Power, Cotton Corporation, RINL, Pawan Hans Helicopters, Hindustan Newsprint, Hindustan Paper, Satlaj Jal Vidyut, Aravali Gypsum & Mineral, Uranium Corporation, Telecommunications Consultants(India), Indian Railway Fund and ITPO. The basic criteria for disinvestment, apart from being a PSU – networth of Rs.200 crore and above and showing a track record of profits for the last three years. So this means that the Govt is actually planning to offload stake in treasures and not dud, loss making PSUs. This like putting the finest treasures on the block!

The good news is that the Govt is finally working on PSU disinvestment and it’s good that elections are round the corner and the Left is out of the picture, leaving very little doubt that this time around, it would surely happen and not remain merely on paper!

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