State-Run Firms Lose Rs 4 Lakh Crore In Market Value This Year

Public sector companies lost nearly Rs 4 lakh crore in market value this year amid concerns about everything from bad loans to higher crude prices.

Of the 76 state-run listed firms, shares of 74 declined, with the fraud-hit Punjab National Bank tumbling the most at more than 65 percent. BEML Ltd., the maker of railway coaches and construction equipment, plunged 62 percent.

Coal India Ltd. and GAIL (India) Ltd. returned gains of about 1 percent each. Coal India, the world’s largest miner of the fossil fuel, benefited from falling stock at power plants and rising prices. GAIL, the largest gas distributor, was helped by higher crude prices, an increase in pipeline tariffs and improving petrochemicals business.

To be sure, India’s equity market remained volatile in 2018. While the benchmark NSE Nifty 50 Index has gained about 4 percent, concerns around a trade war, rising crude oil and a weaker rupee led to a 4 percent decline in the broader NSE Nifty 500 Index. A change in mutual fund investment classification and the recent liquidity concerns around non-bank lenders after Infrastructure Leasing & Financial Services Ltd. defaults also contributed to the selloff.

Among the worst performing state-owned companies, there are three banks, two shipping firms, and one defence and construction company each.

• Punjab National Bank declined after the India’s second-largest public sector lender disclosed a nearly Rs 14,000 crore fraud by jewellers Nirav Modi and Mehul Choksi and their firms.
• Syndicate Bank’s shares fell to a 14-year low as the lender reported its highest ever quarterly loss on account of bad loans and higher provisioning.
• Shares of BEML plunged after the government deferred the planned strategic sale of the Bengaluru-based company. It also reported a quarterly loss of more than Rs 160 crore in the three months to June—the highest loss in at least nine years.

In all, government-owned companies lost close to Rs 4 lakh crore in market capitalisation. Among the top 10 companies that lost the most in market value, three are oil firms, two banks and two defence companies.

• India’s top two oil refiners and retailers Indian Oil Corporation Ltd. and Bharat Petroleum Corporation Ltd. lost more than a fifth of their value as rising crude prices increased investor concerns on marketing margins. The government froze prices of auto fuels in the run-up to Gujarat and Karnataka elections despite the rising crude. With state and general elections scheduled in the next eight months, there are fears that oil retailers’ margins could again come under pressure.
• Shares of State Bank of India fell after the lender surprised investors by posting a third straight quarterly loss. India’s largest lender reported a loss of more than Rs 4,800 crore in three months ended June. Analysts tracked by Bloomberg expected the bank to report a net profit of Rs 238 crore.
• Bharat Electronics Ltd.’s stock plunged after the government’s decision to lower margins for defence orders from 12.5 percent to 7.5 percent.

Of the five government companies that went public in 2018, Mishra Dhatu Nigam Ltd. and Rites Ltd. returned gains. Bharat Dynamics Ltd., Hindustan Aeronautics Ltd. and Ircon International Ltd. are trading below their issue price.