5 PSUs in top 10 market-cap club in 2008, None in 2019!

New Delhi: India's largest bank by the size of the assets, State Bank of India was the only representative of the PSUs in the list of top 10 companies (by Market capitalisation) till the end of August 2019. As soon as its market-cap fell below Bajaj Finance, the sole PSU went out of the elite list. There is not a single Public Sector Undertaking in the top-10 list.

SBI is at 11th in the recent list with market-cap of Rs 2,23,026 Cr, and Oil & Natural Gas Corporation (ONGC) and Indian Oil being the only entrant at the 17th and 20th number respectively in the not so elite list of top-20 companies. The sentiment of disinvestment, stake sale announcements, the poor performance of small and mid-cap segment has ousted the PSUs to the further low in the ladder that was once ruled by them.

In January 2008 when the S&P BSE PSU index was at an all-time high, five PSU stocks – SBI, ONGC, NTPC, NMDC and MMTC were a part of the top 10 companies by market-cap. Today the NTPC has slipped at 25th position, NMDC at 85th and MMTC has slid to 419th position in the overall market-cap ranking. Since the beginning of the calendar year 2019, S&P BSE PSU index has lost around 9.5 percent while the S&P BSE Sensex has moved up around 4 per cent during the same period.

Since its all-time record closing high of 11,093 on January 4, 2008, the S&P BSE PSU index has lost around 41 percent to 6,544 on last Friday, October 4. While the S&P BSE Sensex zoomed 82 percent from the level of 20,686 to 37,673 during this period.

"A number of these PSUs are in the mid-and small-cap segment, which has taken a beating in CY19. That apart, the stake sale proposal and the overall operational performance also had a bearing on the sentiment,"

Explaining the historic fall G Chokkalingam, managing director at Equinomics Research in an interview to Business Standard said "A number of these PSUs are in the mid-and small-cap segment, which has taken a beating in CY19. That apart, the stake sale proposal and the overall operational performance also had a bearing on the sentiment,".

India's largest bank by assets, State Bank of India (SBI) and the sole stock to hang on to this elite list was evicted last week, with its market-cap out falling below that of Bajaj Finance. Reliance Industries, Tata Consultancy Services (TCS), HDFC Bank, Hindustan Unilever, HDFC, Infosys, ITC, Kotak Mahindra Bank and ICICI Bank are now among the top 10 companies with the highest market-cap. In January 2008 when the S&P BSE PSU index was at an all-time high, five PSU stocks – SBI, Oil and Natural Gas Corporation (ONGC), NTPC, NMDC and MMTC were a part of the top 10 companies by market-cap. Currently, ONGC stands at 17th position, NTPC at 25th, NMDC at 85th rank, while MMTC has slipped to 419th position in the overall market-cap ranking, shows data.

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Story of selling stakes and diving stocks

Over the last two years, the government's disinvestment proceeds have ranged between Rs 800 billion to Rs 1 trillion/year. In FY20, the target is steep with more than Rs 1 trillion earmarked for disinvestment. Analysts say privatisation of PSUs can give a meaningful boost to the reforms agenda and can be a trigger for rerating for these stocks. "The NSE PSE index is trading at near- historic lows (both on absolute as well as a relative basis). However, while earnings growth for corporate India has generally been weak, for state-owned enterprises (SOEs) it has been even weaker.

With the sector trading at depressed valuations, we believe any news flow on privatisation can potentially drive rerating of the overall asset class," says a recent UBS report co-authored by Gautam Chhaochharia, their head of India research along with Dipojjal Saha. Chokkalingam also said that the companies that have a healthy cash in hand, have a good possibility of a bull run. "Given the fiscal constraints, the government may ask them to dole out hefty dividends this fiscal. Hence, they become a good dividend play for investors," he said. (With inputs from Business Standard)

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