After the announcement of the results of the general elections on June 4, the shares of the central government-controlled public sector companies are growing at a new pace.
As a counterpoint to this, watch out if the market capitalization of PSUs increased by nearly Rs 12 lakh crore in less than a month.
While the PSU stocks have been posting strong gains under the Modi-led regime, they experienced some headwinds in the run-up to the election results. But after the election results, the growth started again at a rocket pace.
While the market capitalization of PSUs has crossed Rs 12 lakh crore post July 4, by 2024 they have achieved a market capitalization of nearly Rs 22.5 lakh crore.
Due to this, speculations have arisen that the Central Government may be motivated to sell shares of PSUs in order to raise funds using overvaluation. Finance Minister Nirmala Sitharaman will announce the disinvestment target in the Union Budget on July 23.
After the election results came out, the Modi government took power again and continued to implement its policies. Due to this, the growth of PSUs continues to generate excessive profits for the investors.
Shares of companies such as Rail Vikas, Indian Renewable, Shipping Corporation, Masakan Dock, Oil India, Railtel Corp and Cochin Shipyard have risen between 25% and 50% since July 1. Through this, the market capitalization of PSUs has increased by almost 12 lakh crore rupees.
As on March 31, 2024, the central government held more than 75% stake in around 10 listed companies including LIC, IRFC, Uco Bank. According to SEBI norms, investors or promoters cannot hold more than 75 per cent stake in any listed company.
Based on this, the central government may issue an announcement in this budget to sell more than 75% of the company’s shares to comply with SEBI norms. And through this the central government can achieve its disinvestment target.
In last year’s budget, the central government had set a disinvestment target of Rs 50,000 crore, later reducing it to Rs 30,000 crore. In this situation, only if we look at the target size of the current financial year, it will be clear how much the central government is interested in selling PSUs.
