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PSU stocks lag the broader market gains over the past decade

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ET Intelligence Group: The insipid stock returns and unabated disinvestments are waning the union government’s clout in Indian equities. The proportion of the public sector undertakings (PSUs) in India’s total market capitalisation fell to a decade low of 4.6% in June 2020 according to an analysis by the ET Intelligence Group.

There are 76 companies on the stock exchanges where the government holding is more than 50%. Their total market cap is Rs 12.5 lakh crore. Of this, 42% is spread among the top five PSUs by market cap including SBI, ONGC, Power Grid Corporation, NTPC, and BPCL.

The market cap of PSUs shrank by 3% annually over the past decade even as the country’s market cap increased by 8%. Following their poor show, PSUs no longer figure in the list of the country’s top 10 stocks by market cap even though they are still the leaders across sectors including power generation and transmission, oil exploration, gas transmission and lending.

Back in 2010, the price-book (P/B) multiples of the S&P BSE PSU index and the S&P BSE Sensex were similar. The gap between the two has however widened over the years. The P/Bs of the Sensex and the PSU index are at 2.81 and 0.8 currently. Of the PSU sample, more than half or 41 to be precise now trade at P/B of less than one.

Over the past 10 years, the government has raised Rs 3.1 lakh crore by divesting stakes in the leading PSUs such as ONGC, Coal India, and NTPC according to the data from the Department of Investment and Public Asset Management.

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