Talks that PSU companies may offer dividends to their shareholders, do buybacks or divest their stake in them, led to a rise in their share prices by as much as 82 per cent since the beginning of 2012. According to data on the Bombay Stock Exchange, of the 60 PSUs in the PSU index, about 55 have seen a price rise, while five have seen a decline.
Companies which are cash-rich could pay higher dividends or go for the buy-back option, while companies which have a low float would benefit from stake sale. Analysts say these options will enable the Government to raise funds to bridge the growing fiscal deficit. A low float for a company indicates that very few shares are available for trade.
Some of the companies which fall in the low float category and whose stocks have risen on the bourses are Minerals and Metals Trading Corporation, Hindustan Copper, National Fertilisers (NFL), and Rashtriya Chemicals and Fertilisers (RCF). The Government holds more than 90 per cent stake in these companies, according to data on the Bombay Stock Exchange.
“The belief is that the dilution of the Government's stake in these companies could happen at prices better than the prevalent market prices,” said Mr Shrikant Shetty, Equity research and Technical Analysis, Unicon Financial Intermediaries.
The BSE PSU Index surged by around 11 per cent during the period under consideration. Of all the stocks in the index, only five saw a decrease in their prices. Three of these - HPCL, ONGC, Oil India – saw a marginal drop of less than one per cent in their prices. Gail India fell by around four per cent, while Indian Oil Corporation fell 6.3 per cent.
Cash-rich companies such as Coal India have seen their share prices soar by around 10 per cent. Coal India could also have seen a rise in prices as the salary hike that was demanded by its union may be lesser than expected, said an analyst who did not wish to be named.
ONGC has dipped marginally, by 0.8 per cent through 2012; market-men say that with ONGC, one of the biggest companies in the market with a free-float of around Rs. 44,000 crore, there is the likelihood of a follow-on public offer (FPO). ONGC was to announce its FPO last year, but deferred it post a ‘pricing issue' with the merchant bankers.
Some analysts though also point out that the rise in PSU stock prices could also be due to sector-specific news circulating in the market. Fertiliser stocks like NFL, RCF also witnessed a sharp increase in their stock prices as urea stocks are expected to rise. However, the catch here is that there may only be a reduction in subsidy and not an actual price rise in urea, said analysts. The benefit may not necessarily percolate down to the fertiliser companies, they added.
“Banks, in general, including PSU banks had been significant losers last year. So, we expect investor interest to return in this sector as there is expectation that RBI may cut rates. This would happen over the year. A possible rate cut will help credit growth,” said Mr. Ramanathan.K, Chief Investment Officer, ING Investment Management (India).
sneha.p@thehindu.co.in