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Govt holding in NSE-listed cos at record low

Reasons include divestment of govt stake, limited new listings of govt-promoted entities over the past decade.

Written by Sandeep Singh | New Delhi | August 14, 2020 2:04:16 am

Weak performance of state-owned companies at the stock exchanges, divestment of government stake and limited new listings of government-promoted entities over the past decade has meant that the Government of India’s (GoI’s) holding, as a promoter and pubic shareholder, in companies listed on the National Stock Exchange (NSE) has come down sharply to hit an all-time low of 6.36 per cent in June.

Data sourced from PrimeInfobase.com shows that over the last 10 years, the share of government holding (by value) in NSE-listed companies has come down from 20.58 per cent in June 2010 to 6.36 per cent in June 2020. As a result, the value of the holdings has declined from Rs 12.15 lakh crore in June 2010 to Rs 8.63 lakh crore in June 2020.

While the value of government holdings has come down significantly, promoters of private sector entities have seen their overall holding in companies listed on the NSE jump from 34.26 per cent to 44.43 per cent, and their value of holdings tripled from Rs 20.24 lakh crore to Rs 60.67 lakh crore in this 10-year period.

Stating the reason for the decline in government holding in NSE-listed companies, Pranav Haldea, MD, Prime Database said, “The decline is on account of the government’s disinvestment programme, not enough new listings as also lacklustre performance of CPSEs relative to their private peers.” Over the last 10 years, the government has come out to list 17 companies and raised a total of Rs 49,167 crore through IPOs.

Explained

Promoters of pvt entities reap dividends

while the value of government holdings has come down significantly, promoters of private sector entities have seen their overall holding in companies listed on NSE jump from 34.26 per cent to 44.43 per cent and their value of holdings triple.

Besides, limited number of fresh listings of government-owned entities, a dismal performance by state-owned companies at the bourses has resulted in a dip in government’s diminishing holding in stock markets.

Since January 2010, while the Sensex has jumped 120 per cent from 17,464 to 38,369, the BSE PSU index has declined 47 per cent from 9,531 to 5,049. In the same period, BSE CPSE index has gone down by 54 per cent — from 2,255 to 1,027. Even the broader BSE 500 index has generated a return of 115 per cent in the 10-year period. Even during the pandemic, while the Sensex has recovered 48 per cent since the lows it hit on March 23, 2020, the BSE PSU index has risen only 23 per cent between March 23 and July 12, 2020. Over the last quarter, government holding in NSE-listed companies fell from 6.56 per cent to 6.36 per cent.

State-owned — the country’s largest domestic institutional investor — Life Insurance Corporation (LIC) has seen a rise in its holding in NSE-listed companies over the last quarter, as its holding rose from 3.88 per cent in March 2020 to 3.97 per cent in June 2020. LIC’s share however has also witnessed a decline over the last decade from 4.89 per cent in June 2010 to 3.97 per cent in June 2020. However, the value of its holdings has grown 87 per cent from Rs 2.88 lakh crore to Rs 5.4 lakh crore in the same period. In the quarter ended March 2020, the value of LIC’s holding stood at Rs 4.25 lakh crore.

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