Do it yourself

I have received several responses to my post regarding investment in the public sector enterprises ( see here ). A majority of respondents do not agree with my hypothesis.  Their argument is that any business venture cannot be sustainable if it is not run for profit. For decades, PSEs have incurred losses and have been supported with public money. In the past one decade the policy towards PSEs has witnessed a paradigm shift. The focus has shifted to make PSEs profitable rather than privatize them. It is in the public interest that PSEs make good money and pay dividends and capital gains (on sale of minority interests) to the government, which can be used to finance public services. A majority therefore believes that strong profitability of PSEs is in the interest of the economy in particular, and the broader nation interest in general. Some agree with my hypothesis  that presently the government does not have the constitutional mandate to indulge in “for profit” businesses. Th...

The government of India has been the greatest value destroyer for the investors in Indian Equities. The Nifty PSE index, comprising most listed PSU stocks, now trades at the same level as it was in 2006, implying no return for 13yrs, if we consider point to point investment period. The CPSE ETF comprising top 22 Central government undertaking stocks, launched in 2014 is giving negative return to its investors. Many large Public Sector companies are now trading at multi year low prices, adjusted for all dividends and other corporate actions. The government of India therefore has legal and moral duty to explain to the investors, why it should continue to manage these businesses. They have obviously not managed these great businesses like MTNL BEL, Coal India, etc well and destroyed huge wealth for the nation as a whole and individual investors as well. The Supreme Court may like to examine, whether the government should be permitted in the first place t...

As per media reports the government is seeking huge dividends (Rs190bn) from oil PSUs to meet its fiscal shortfall ( see here ). It is also reported that some companies might have to borrow money to pay the required amount of dividend as the cash balance with them may not be sufficient to meet the demand. Obviously the payout will at the expense of cutting capex and impairing the future growth potential. In summer of 2016 also, the "Finance Ministry" had directed all profit making PSUs to use their surplus cash to buy back shares and pay handsome dividend, besides considering issuing bonus shares or going for stock split. ( see here ) Since then the benchmark Nifty50 has gained over 42%, while the Nifty CPSE has lost over 9%, underperforming the benchmark by massive 51%. I have said it many time before, and I would like to reiterate this again - for a common investors, finding any reason for investing in a public sector enterprise (PSE) is extremely cha...

Some food for thought "I may neither choose who I would, nor refuse who I dislike; so is the will of a living daughter curbed by the will of a dead father." —William Shakespeare (English writer 1564-1616) Word for the day Ideogram (n) A written symbol that represents an idea or object directly rather than a particular word or speech sound, as a Chinese character.   First thought this morning I chanced upon a twitter handle @theworldindex. It has some very interesting data about various countries in the world. Though there is no way to authenticate the data, but intuitively I can say it does not sound too off the mark in many cases. The following is some data I found interesting to note and actionable for the government. Chart of the day Use PSE for public good There are hundreds of not for profit organizations that have been set by government in post independence period. These organizations are f...