India's Best Public Sector Undertakings 2019

India's Best Public Sector Undertakings 2019

Preface

PSUs Continue To Soar High!

Dalal Street Investment Journal is pleased to bring you the much-anticipated DSIJ PSU Awards. Since 2009, the birth year of this flagship issue, we have identified the efforts and the brilliant achievements of the PSUs in India and we yet again present to you our celebrated PSU Journal. Public sector undertakings (PSUs) are considered to play a significant role in the development of the Indian economy. These are government-owned corporations wherein 51 per cent or more of the paid share capital is held by the central government or by any state government or partly by the central government and partly by one or more state governments.

Thus, several PSUs continue to regularly provide tremendous employment opportunities in various technical and management areas. India’s gross domestic product (GDP) was estimated to be Rs 145.65 lakh crore, which is around USD 2.06 trillion, for 2019-20. As a result of the impact of the pandemic, in October 2020, the International Monetary Fund (IMF) projected a GDP contraction of 10.3 per cent in FY21 for India while global growth is expected to witness a contraction of 4.4 per cent for the same period. In 2018-19, the revenue of operating central public sector enterprises (CPSEs) was reported to be Rs 25.43 lakh crore, which was an increase by 18.03 per cent compared to that of Rs 21.55 lakh crore in the previous year.

In 2020, as part of the ‘self-reliance’ package, the Government of India announced its decision to have four public sector companies in strategic sectors while eventually privatising state-owned firms in other segments. For the PSU sector to flourish well, several initiatives have been undertaken. The MSCI recently announced considering changes in the foreign ownership limits in the MSCI global indices for Indian stocks. PSU companies stand to hugely benefit from this change wherein the individual FII limit is 50 per cent and the sector limit is 74 per cent. Further, according to the MSCI, 74 per cent will be considered as a free float.

As PSUs continue to play a vital role in various fields, we had the pleasure to interact with some of India’s foremost business leaders who have shared their precious opinions with our readers. We have special respect for the business leaders of valuable PSU corporations as they strive to maintain a positive growth trend for their respective corporations even in such difficult times of the pandemic wherein many have faced big hurdles. As years come, we hope to see the PSUs reaching their full potential and hogging the limelight with their performance. I also take this opportunity to thank the participants and also our avid readers for being able to present to you the PSU special issue. With your valuable support as our backbone, we will continue to strive to present you relevant information in coming years as well.

Yogesh Supekar
Deputy Editor 

Public Sector Enterprises:

India’s Jewel In The Crown

While there is a false notion that public sector enterprises are loss-making business organisations that suffer from an overload of bureaucracy and operational inefficiency, the truth is totally different. Contributing around 13 per cent to India’s GDP in terms of turnover and contributing over Rs 3.68 lakh crore to the Indian exchequer through taxes and dividends, PSEs have played a significant role in the development of the country’s demographics across all regions 

India has emerged as the fastest growing economy in the world and it is expected to be one of the top three economies in the world in the next 10-15 years, states a report. India’s gross domestic product (GDP) was estimated to be Rs 145.65 lakh crore (USD 2.06 trillion) for 2019-20. The country’s GDP is expected to reach USD 5 trillion by FY 2025. The government is taking measures to boost the contribution made by the manufacturing sector with an aim to take it to 25 per cent of the GDP from the current 17 per cent. In October 2020, the International Monetary Fund (IMF) projected a GDP contraction of 10.3 per cent in FY21 for India. 

Global growth is projected to be a contraction of 4.4 per cent in the same period. The IMF’s outlook for India is worse than the central bank’s prediction of a 9.5 per cent contraction in FY21. IMF said that India is expected to rebound in 2021 with 8.8 per cent growth. The impact of the corona virus has hit almost every major country, but its adverse effects in India could be high given the inherent complexities. To deal with economic turmoil caused by pandemic, the Government of India announced a stimulus package worth Rs 20 lakh crore, which is around 10 per cent of the GDP. 

Role of the PSEs

The Indian public sector enterprises (PSEs) were created with the purpose of achieving a socioeconomic balance. Their objectives include maintaining stability in prices and creating benchmark standards for prices of essential items while serving various parameters of economic growth and reducing dependency on other countries for goods and services. PSEs have supported the growth of the Indian economy. PSEs are net contributors to the Indian economy. Contributing around 13 per cent to India’s GDP in terms of turnover and contributing over Rs 3.68 lakh crore to the Indian exchequer through taxes and dividends, PSEs have played a significant role in the development of the country’s demographics across all regions.

They have shown great strength and sustained the Indian economy during the challenging times of global recession. They have contributed to a high extent to develop the social fabric of the country. PSEs have moved beyond Indian boundaries and are exporting their products globally. They have proved themselves internationally. Out of 57 Indian companies featuring in Forbes 2000 – World’s Biggest Public Companies for the year 2019, 10 are PSEs and out of six Indian companies featuring in the Global Fortune 500 list for the year 2020, three are PSEs.

Adopting the LPG Model

The post-independence Indian economy was primarily an agriculture-based economy. It had an absence of industrial activities; economic activities were prominent in specific parts and also there were insufficient infrastructure facilities. To develop the economy and at the same time meet social justice, India opted for a mixed economy, under which both private and public enterprises would contribute towards a balanced industrial growth. But during this phase private players were unable to attract investments. In 1991, India adopted the ‘liberalisation, privatisation and globalisation’ (LPG) model, which proved to be a turning point in the country’s economy. PSEs undertook initiatives for up-scaling technologies and building capacities to meet the competition from domestic private players and multinational companies. During the first Five Year Plan, there were only five PSEs with a total investment of Rs 29 crore which increased to 348 PSEs in 2018-19 with an investment of Rs 16.41 lakh crore. It is a popular belief that PSEs are draining our national resources. But if we check the facts it can be seen that out of 249 operating PSEs, 71 per cent are profit-making while 28 per cent are loss-making. The market capitalisation of only 56 PSEs was over Rs 13.71 lakh crore as on March 31, 2019, which is close to 10 per cent of the total market capitalisation of the BSE.

Dealing with the Pandemic

During this crucial time of the corona virus-triggered pandemic, PSEs have supported the government’s initiative by undertaking various measures such as utilising their health units to create isolation facilities or quarantine wards, working towards making food and shelter arrangements for the needy, manufacturing medical equipment and ventilators, and providing necessary medical support across the country while also creating awareness among masses and employees through various modes of communication and contributing a significant amount to Prime Minister Cares Fund.

Sector-Wise Performance

CPSEs are classified into various categories like agriculture, mining and exploration, manufacturing, processing and generation, and services. If we consider the PSEs’ return on net worth, it can be concluded that the mining and exploration sector has given the highest return of 19.98 per cent along with 12.58 per cent by manufacturing, processing and generation and 3.76 per cent by services while the agriculture sector has given a negative return of 3.73 per cent. The overall return on the net worth of all operating CPSEs taken together was 12.11 per cent during the year 2018-19.

During the year 2018-19, the mining and exploration sector gave the highest return on capital employed of 24.58 per cent. Manufacturing, processing and generation gave ROCE of 12.75 per cent. The services sector gave ROCE of 4.55 per cent while the agriculture sector gave negative ROCE of 4.55 per cent. The overall return on capital employed of all operating CPSEs taken together was 10.76 per cent during the year 2018-19. 

Highlights

Total paid-up capital in CPSEs as on March 31, 2019 stood at Rs 2,75,697 crore as compared to Rs 2,53,977 crore as on March 31, 2018, showing a growth of 8.55 per cent.

Total Investment in all CPSEs stood at Rs 16,40,628 crore as on March 31, 2019 as compared to Rs 14,31,008 crore as on March 31, 2018, recording a growth of 14.65 per cent.

Capital employed in all CPSEs stood at Rs 26,33,956 crore as on March 31, 2019 as compared to Rs 23,57,913 crore as on March 31, 2018, showing a growth of 11.71 per cent.

Total gross revenue from the operations of all CPSEs during 2018-19 stood at Rs 25,43,370 crore compared to Rs 21,54,774 crore in the previous year, showing a growth of 18.03 per cent.

Total profit of 178 profit-making CPSEs stood at Rs 1,74,587 crore during 2018-19 compared to Rs 1,55,931 crore in 2017-18, showing a growth in profit by 11.96 per cent.

Total loss of 70 loss-incurring CPSEs stood at Rs 31,635 crore in 2018-19 compared to Rs 32,180 crore in 2017-18, showing a decrease in loss by 1.69 per cent.

Overall net profit of all operating CPSEs during 2018-19 stood at Rs 1,42,951 crore compared to Rs 1,23,751 crore during 2017-18, showing a growth in overall profit of 15.52 per cent.

Reserves and surplus of all CPSEs stood at Rs 9,93,328 crore as on March 31, 2019 to Rs 9,26,906 crore as on March 31, 2018 showing an increase by 7.17 per cent.

Contribution of all CPSEs to the central exchequer by way of excise duty, customs duty, GST, corporate tax, interest on central government loans, dividend and other duties and taxes stood at Rs 3,68,803 crore in 2018-19, which increased from Rs 3,52,361 crore in 2017-18, showing an increase of 4.67 per cent.

Foreign exchange earnings through exports of goods and services stood at Rs 1,43,377 crore in 2018-19 as against Rs 98,714 crore in 2017-18, showing an increase of 45.24 per cent.

Conclusion

Over the last six decades, PSEs have fuelled growth in the Indian economy. They have helped to build strong industrial infrastructure and achieved socioeconomic balance in the country. They have sustained themselves in this long period of ups and downs. Many of the PSEs represent India internationally. Being public sector companies, they meet certain commitments and responsibilities on the economic front. Their significance in the Indian economy can be seen from the fact that they are contributing around 13 per cent to the Indian GDP and over Rs 3.68 lakh crore rupees to the Indian exchequer through taxes and dividends.

To fulfil their social commitment in 2018-19, 150 CPSEs spent over close to Rs 3,900 crore on CSR activities, registering a growth of approximately 13 per cent in the CSR expenditure. The government has taken constant efforts to improve the working of the PSEs and the introduction of Maharatna, Navratna and Mini Ratna is a step in that direction. This status has granted certain fixed authority to these companies. But PSEs need to get more competitive in their operations. They have shown that they are a very important part of the Indian economy and they will continue to show it.

To download the Full List of  Roll of Honour Click Here 

India’s Best Public Sector

PSU Ranking Methodology 

We follow a ranking methodology for PSUs based on comprehensive financial parameters. We have evaluated data only of Maharatnas, Navratnas and Miniratnas, among CPSEs. Again, these companies are divided into manufacturing and non-manufacturing, depending on their areas of operation.

We ranked and awarded companies in three categories – Maharatna/ Navratna/ Miniratna of the year, Most efficient Maharatna/ Navratna/ Miniratna and Fastest growing Maharatna/ Navratna/ Miniratna.

For the first category of award, the main criteria was the size of the company relative to its peers in the category. The basic parameters to assess the winner companies are in terms of Balance Sheet size, net sales and profitablilty. These parameters are used to evaluate the companies in terms of size. To calculate the final rank, major weightage (30%) is given to Operating Profit and Net Sales each and then the remaining weightage (20%) is given towards Balance Sheet size and Net profit. The composite ranking provides the basis of deciding the winner.

For selection of the most efficient companies, we evaluated the operational efficiency of the company. Hence, we have considered parameters like profitability per employee, cost of employee as against sales, working capital efficiency and leverage ratio. These parameters reflect the level of efficiency the companies are delivering. Equal weightage has been given to all the four parameters to arrive at the final ranking.

For selection of the fastest growing companies, the emphasis is on the growth achieved during the last five years, as compared to the peers. For this, we consider the growth in sales, net profit and operating profit. To weave in the operational performance compared to the capital invested, we also evaluate return on net worth and return on capital employed. The compounded annual growth for last 5 years relatively depicts a true picture of the company in terms of its overall growth. All individual parameters are given appropriate equal weightage to calculate the final rank.

Banks

We evaluate banks and assign ranks using operating profit per employee, growth in operating profit and balance sheet size. Operating profit per employee shows efficiency of banks, growth in operating profit shows growth and balance sheet size shows the size of the banks. For the calculation, higher weightage (60%) is given to operating profit per employee and the remaining weightage is equally distributed between growth in operating profit and balance sheet size .

Insurance

In insurance, we are keen to see that the growth in premium is balanced with the growth in claims. Also, we rank the companies to reassure that the best Balance Sheet is rewarded so that the liabilities are sufficiently provided by the reserves and balances.

To download Financial Data Bank PSU Click Here 

 

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