Winning the trust vote makes Govt richer by Rs 64,000 cr in M-cap

Aarati Krishnan

BL Research Bureau The recent political tussle, which ended with the incumbent government winning the Trust vote on July 22, has left the Union Government richer by Rs 86,600 crore, at least on paper.

With stock prices of listed PSUs rallying strongly over the past two weeks, the market value of the Government's equity stakes in these companies has shot up sharply. Stocks of State-owned companies have been propelled by expectations that, with the Trust vote out of the way, the Government may push through with its divestment programme and put a portion of its stakes in these companies on the block.

The total Central Government holding in the listed PSUs, put together, is worth Rs 8.29 lakh crore at today's market prices, up from Rs 7.42 lakh crore on July 9. The bulk of these gains, Rs 63,900 crore to be precise, have come after the Government managed to win the Trust vote.

National Aluminium (33 per cent gain), ITI (31 per cent) and HMT (29 per cent) where the Central Government holds equity stakes of between 87 and 98 per cent, have been the strongest gainers in the PSU pack in this period. In market capitalisation terms, NTPC, ONGC and NMDC, apart from banking giants SBI and PNB, have been the major contributors to the increase in Government 'wealth'.

The recent market fancy for State-owned companies has resulted in an 11.9 per cent gain in the BSE PSU index since July 9. In this period, the index has sharply outpaced the broad market, with the Sensex gaining just 2.2 per cent. This is in sharp contrast to stock price trends in PSUs over the past year. In the year to July 2008, the BSE PSU index significantly lagged the broad market, recording a 13.6 per cent fall, against the lower 7.2 per cent decline in the Sensex