Business Today

2003 yet again?

PSU stocks will be in the spotlight in 2010, if the government walks the talk on disinvestment, circa 2003.

Virendra Verma | Print Edition: January 10, 2010

In June 2003, the Maruti IPO (offer price Rs 115) became one of the harbingers of the longest bull run in the Indian stock markets. Will the PSU IPOs and FPOs planned for 2010 recreate some of that effect? To be sure, after an annus horribilis in 2008, the bulls are back in business already.

Consider this: in 2009, the bellwether BSE Sensex has soared 75 per cent and outperformed most equity markets globally. The reasons for the euphoria are not hard to pinpoint— upturn in the domestic economy, a stable government after general elections, expectations of a revival in the global economy and robust FII inflows.

And even as analysts appeared divided on whether the Sensex—trading at a forward earnings multiple of 16—was a touch expensive than most emerging markets, came a policy initiative which could be the next big trigger for the equity markets in 2010. The decision by the Union government to divest stake in all profit-making public sector undertakings (PSUs) is to meet the mandatory listing of 10 per cent public ownership.

On a conservative estimate, the government can raise at least Rs 25,000 crore through disinvestment in 2010. Some of the big-ticket PSU share sales expected in the new year include 5 per cent stake offering in power utility major NTPC, 8.38 per cent in mining firm NMDC, and 5 per cent in steel maker SAIL.

This has rekindled hopes on Dalal Street that disinvestment will come as a booster dose for bulls in 2010—perhaps in many ways a repeat of 2003-04, the fiscal year to have the highest mobilisation through disinvestment during the previous National Democratic Alliance (NDA) regime. During this period, share prices of several divestment candidates, like GAIL and ONGC, had shot up between 50 and 100 per cent.

So far, investors have preferred to wait and watch from the sidelines for some concrete steps by the government. "There have been a lot of announcements but hardly any action," says Prithvi Haldea, Managing Director, Prime Database. But clearly, if the government walks the talk, it will be the defining theme for the stock markets in 2010. Haldea points out it will be a win-win for everyone. The value of government holding in PSUs will rise even as they mop up additional resources from the market. And investors, too, will make significant gains on their equity portfolio.


  • The Government could raise a possible Rs 25, 000 crore through divestment.
  • At least 5 listed PSUs could make a follow-on offer.
  • Another five unlisted profitmaking PSUs could go in for IPOs.
  • Some of the biggest PSUs - NMDC, SAIL, NTPC, and Coal India - will tap the markets.

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