Government will shine their financial performance before selling to public sector companies
The government plans to raise financial targets for public sector companies (PSUs). It wants the valuation of some companies to be increased before Prime Minister Narendra Modi promotes privatization. The government’s plan came from government documents and sources.
PSU to try to increase MCap and dividend payment from 2021-22
The government, which is trying to bridge the revenue deficit against its expenditure, wants public sector companies to try to increase their market capitalization and dividend payments from 2021-22. The government also wants these companies to accelerate the sale of non-core assets for non-core assets, or core business, by the new financial year beginning April 2021.
PSUs have traditionally been focused on increasing production and revenue
Public sector companies have traditionally been focused on increasing production and earnings rather than increasing their efficiency and valuation, which has resulted in their stock prices being lower than the main index of the stock market for years. The annual target of public sector companies can be announced in the budget 2021-22.
Need to increase the ability to evaluate and earn maximum profit
The source, which is aware of the government’s plan, said, “Companies need to increase their valuation and ability to earn maximum profit in the changing environment. Only then will the government get a better price by selling its shares in those companies. Shareholders and investors should reap the fruits of their contribution.”
Plan to raise Rs 3.25 lakh crore in 5 years through privatization
Several public sector companies including Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), NMDC (NMDC), Coal India, Bharat Heavy Electricals (BHEL) and BEML after Modi government re-assumed power in 2019, planned to raise Rs 3.25 lakh crore in 5 years by selling its stake. It announced steps to give the private sector companies in the hands of the non-strategic sector in terms of economy. It has already taken steps to privatize Bharat Petroleum (BPCL), Container Corp and Shipping Corp.
The first time a standard PSU like EBITDA will be in the annual target
According to draft guidelines and sources for approval from a committee comprising officials of several ministries and a cabinet secretary, the government will for the first time include standards like EBITDA in the annual target of public sector companies. He said that the second target of government companies would also include standards like market capitalization or share price and return on net worth and return on capital employed.
PSU will spend the money acquired from the sale of properties to repay the debt
The source said, “Government companies will need to spend the money they earn from the sale of their assets in things like repaying debt. They will have to increase their return on capital employed and return on equity.”According to government documents, the performance of unlisted companies will be measured on the standard of improving their EPS i.e. profit per share. The bonus and incentives of managers of government companies will depend on the annual target achieved by them. The source said that the Department of Investment and Public Asset Management (DIPAM) has suggested changes in the annual target policy.
