PSUs: Safest stock market bet
12/5/2011 12:29 PM Monday
Indian PSUs’ Performance: Q2 Highlights
The September 2011 quarter results suggest that India Inc. is not trading on firm ground. However, the performance of the PSUs indicates that despite being traded at a low level, they hold the potential of upward movement in the coming times. PSUs are undoubtedly safe investment choices, considering their strong presence in their respective markets, as well as their solid fundamentals.
The topline of PSU companies increased by 23% and 22.50% on a YoY basis, and by 6.6% and 9.67% on a QoQ basis, after adjusting for refineries and extraordinary items respectively.
Similarly, a comparative analysis between the PSUs and the private sector shows that while the PSUs (excluding oil marketing companies) managed to post almost 20% bottomline growth, the private sector was a letdown, with profits declining by almost 53%.
On the other hand, public sector banks saw a marginal growth of seven per cent in their aggregate bottomline, despite the topline increasing by 35%. This was on the back of higher provisions made by these banks, which increased by 34.62% to Rs 12206 cr (where private sector banks saw a decline in provisions by 30% to Rs 1380 cr).
In the power sector, despite rising coal prices and the political crisis in Andhra Pradesh that resulted in a coal shortfall, all the PSUs registered a growth, though marginal.
In the oil & gas sector, ONGC benefited the most from higher crude oil realisations and lower dry well expenditure. GAIL has set a target for itself to reach a turnover of Rs 1 lakh cr by 2016-67 under its growth plan ‘Strategy 2020’.
GAIL: From Strength To Strength
GAIL is one of the leading public sector enterprises, with a consistently excellent financial track record. The company’s turnover and Profit After Tax during the last 10 years have shown a compounded annual growth rate of 14% and 12% respectively. In the year 2010-11, it recorded a turnover of approximately USD 7.2 billion and Profit After Tax of approximately USD 790 million.
GAIL has recently acquired a 20% interest in Carrizo's Eagle Ford Shale acreage position through its wholly-owned subsidiary company, GAIL Global (USA) Inc. The JV will have 20200 gross acres, of which the GAIL subsidiary would have 4040 net acres, spread over 4 counties in Texas.
GAIL is an equity partner in 3 retail gas companies in Egypt, namely Fayum Gas Company (FGC), Shell CNG Egypt (SCNGE) and National Gas Company (Natgas). It is also an equity partner in China Gas Holdings (China Gas), a retail gas company involved in the city gas and CNG business in China. Both GAIL and China Gas have formed an equally-owned JV company, GAIL China Gas Global Energy Holdings, to pursue gas sector opportunities, primarily in China. GAIL is also a part of a consortium in 2 offshore E&P blocks (A-1 & A-3) in Myanmar, and holds participating interest in the JV firm, South East Asia Pipeline Company, incorporated for the transportation of the gas to be produced from A-1 and A-3 blocks in Myanmar to China.
GAIL (India), the flagship natural gas company of the Govt. of India has recently opened an office in Singapore. The company will operate in Singapore through its subsidiary GAIL Global (Singapore) Pte. (GGSPL), and will focus on activities pertaining to gas sourcing, gas trading and petrochemicals trading. It will undertake the purchase and sale of LNG cargo on spot/short-term trading. So far, through its Singapore arm, GAIL has made investments in China, Egypt and other countries, and the company will continue to pursue opportunities for further investment in different countries.
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