PSU stocks react positively to disinvestment plans

Timing, pricing of public issues would be vital: Analysts.


Our Bureau

Mumbai, Nov. 6 Shares of PSUs with more than 90 per cent Government stake gained between 10 and 20 per cent in Friday after the Cabinet decided to raise public shareholdings in the companies to at least 10 per cent.

The Cabinet Committee on Economic Affairs on Thursday approved a mandatory minimum 10 per cent public ownership in all listed and profit making PSUs. The committee also approved listing of all the unlisted but profitable PSUs.

"This is a very positive move as it will bring more accountability and more transparency to the Government companies," said Mr Gopal Agrawal, Head of Equity, Mirae Asset AMC.

All the PSU stocks registered gains after the stock market opened on Friday, but the gains were the most in those listed PSU with less than 10 per cent public shareholding.

The stock of MMTC (Rs 10 face value) gained 20 per cent to close at Rs 36,146.85 on the BSE. Public holding in MMTC is less than one per cent, with the Government holding a 99.33 per cent stake.

PSUs with more than 90 per cent Government holding that gained heavily on Friday were HMT (Government stake 98.88 per cent), Hindustan Copper (99.59), NMDC (98.38), State Trading Corporation of India (91.02), Rashtriya Chemicals and Fertilizers (92.50), and Engineers India Ltd (90.40).

The BSE PSU index closed with a gain of 3.91 per cent on Friday while the Sensex rose only 0.59 per cent.

But timing of the issues by the public sector companies would be vital to their success, said market experts.

National Hydroelectric Power Corporation's Rs 6,000-crore IPO had a subdued listing and its shares are trading below the issue price of Rs 36.

However the stock bounced back on Friday and closed with a gain of 6 per cent on the BSE at Rs 32.65.

"They (IPOs) should be made at a time when the retail investor sentiment is good or else they might not be received well," Mr Hitesh Arawal, Head of Research at Angel Broking Ltd, said.

"Also if investor sentiment is not positive, then instead of fresh money coming into the system, retail investors might pull out from the secondary market to invest in the primary market. In that case the secondary market will be impacted and the IPOs might not fetch good valuations," Mr Agrawal said.

The unlisted and profit-making PSUs that are strong candidates for listing include Nuclear Power Corporation, Coal India, BSNL, Rashtriya Ispat Nigam, North Eastern Electric Corporation, Satluj Jal Vidyut Nigam, said market-men.

"The pricing of the IPOs of these companies should be reasonable for substantial retail investor interest," said Mr Agrawal.