Finance Friday:Crowning Glory For ONGC,SAIL and NTPC

The government has recently upgraded the status of three PSU’s from ‘Navratna’ to ‘Maharatna’ .What this means in layman’s language is that,

ONGC , SAIL  and NTPC will enjoy greater financial and operational autonomy in a bid to scale up their operations and expand globally. (Business Standard)

Indian PSU sector has seen a lot of fresh reforms recently including the Government’s disinvestment plan.Indian Government has been awarding Navratna status to select few Public sector enterprises to offer greater autonomy to these firms.However, the journey from ‘Navratna’ to ‘Maharatna’ is a rather stringent one and the government has decided to choose 4 PSU companies for that status out of the 18 Navratna companies.

The parameters set by the government include a three-year track record of annual net profit of over Rs 5,000 crore, net worth of Rs 15,000 crore and turnover of Rs 25,000 crore, besides being listed entities in the bourses.

ONGC,SAIL and NTPC seemed to have met the criterion and have been awarded with the ‘Maharatna’ status.This will give these companies an increase level of decision making power especially in financial matters.For eg: A Maharatna PSU can take investment decisions up to Rs 5,000 crore as against the present Rs 1,000 crore limit without seeking government approval.This is crucial since government interference could mean huge delays.

All 3 companies operate in high investment sectors and require fresh joint ventures and investments for their growth.A greater autonomy and increased limit of raising capital could be a shot in the arm for these firms to expand their operations and forge new alliances.PSU companies have been ramping up their processes and have started paying top dollar to attract the best talent.With a talented team on board and a relaxed hand in decision making, these companies can sure turn things around for themselves.

With the government disinvestment plan already underway theses PSU’s should be sitting at huge cash reserves.The ‘Maharatna’ status will allow them to use the capital in the best way deemed without much back and forth discussions with the government.

The onus will be on these companies to leverage the greater autonomy and raise the bar.Will they capitalize on the increased powers is a question that will be answered in due course of time.However, the ‘Maharatna’ crown can act as an incentive for other Navratna PSU’s to scale up their operations and become eligible for the coveted award.

What do you think? Will the new crown help these companies expand their global footprint and become MNC’s as the government has envisaged, or these companies lack the necessary firepower to make use of the greater autonomy?

Share & Bookmark

Author: Ankit Agarwal

Ankit Agarwal is an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion. You can follow him on twitter @ankit_a

Related posts:

1. Finance Friday:The Great PSU sale is on, Government To Raise Crores
2. French Auction: Government Fails To Learn Lessons From NTPC FPO !
3. Finance Friday: India News Digest
4. Finance Friday: Deal Radar, Acquisitions , Rate Hike
5. Finance Friday: India News Digest
6. Finance Friday: M&A Activity in India, Down but not out
7. Finance Friday: India News Digest
8. Finance Friday: Who Made You The Maximum Money In The Stock Market This Year
9. Finance Friday: India Inc recovering well, industrial numbers bear the testimony
10. Finance Friday : India To Lead Global Recovery

Tagged as: cash reserves, disinvestment plan, government approval, Government Interference, investment decisions, investment sectors, navratna, operational autonomy, public sector enterprises, what this means