Dun & Bradstreet India’s Top PSUs 2019

2019

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India’s Top PSUs 2019 Published in India by Dun & Bradstreet Information Services India Pvt Ltd.

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Editor

Pankaj Khanna Naina Acharya

Sub-Editor

Editorial Team

Yogesh Jambhale, Omesh Kandalkar, Mihir Shah, Christopher D’Souza, Rohit Pawar, Nishikant Sharma

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or any person or entity. India’s Top PSUs 2019 12 th Edition ISBN 978-93-86214-34-8

Contents Preface................................................................................................................. 1 Foreword.............................................................................................................. 3 Executive Summary.............................................................................................. 5 Methodology. ...................................................................................................... 7 Definitions & Calculations.................................................................................... 9 PSU Overview..................................................................................................... 13 Special Section CSR Initiatives. .............................................................................................. 32 Swachh Bharat Initiatives..............................................................................36 Digital Initiatives........................................................................................... 38 Employee Welfare Initiatives........................................................................40 Export Performance......................................................................................42 Experts’ View. ............................................................................................ E-1 - E5 Listings Complete List of Central PSUs. ............................................................ L1 - L13 State PSUs.......................................................................................... L15 - L43 List of Maharatnas, Miniratnas & Navratnas.............................................. L45 Listings of Profiled Central PSUs........................................................ L47 - L53 Profiles of India’s Top PSUs Non - Financial Segment..........................................................................1 - 50 Banks. ....................................................................................................53 - 61 FIs/NBFCs...............................................................................................63 - 67 Insurance...............................................................................................69 - 72 Index. .......................................................................................................... 75 - 79

Preface

Dun & Bradstreet India is pleased to present the 2019 edition of its publication, India’s Top PSUs . The publication gives aggregate insights on India’s leading Public Sector Undertakings (including banks and insurance companies) and includes detailed profiles of 169 such companies. In the years since independence, State-Owned Enterprises (SOEs), also called Government-Owned Enterprises, have played an important role in our country, specifically in two areas: they have provided balanced regional development and have played an important role in equitable redistribution of wealth and income. To achieve the target of making India a US$ 5 trillion economy, the government would like the SOEs to play a bigger role by increasing their contribution to 10% of GDP from the current level of 5%. To put this into perspective, in the last 10 years, the contribution of the SOEs has never been higher than 8% of GDP. Further, it has declined from 8% in FY08 to less than 5% in FY18. SOEs will have to reverse this downward trend and double their contribution in the next few years.

Looking closely at the SOEs’ contribution to GDP, we have seen that 4 out of 339 SOEs contribute to 58% of the total GDP generated by all SOEs, another 16 contribute to 34%. Further, the next 12 contribute to 11%. These 32 enterprises contribute to more than 100% of GDP. How is this possible? The answer is that there are many enterprises that do not contribute, or contribute negatively to GDP. They contribute negatively to GDP as these enterprises run into losses, although admittedly, a few of them were set up for reasons other than commercial success. When the D&B team of economists studied Indian SOEs, we found three interesting aspects: two positive and one negative. The first positive is that large SOEs are more resilient than large private companies. For two decades, D&B has been tracking the Top 500 companies in India. For the cohort of the year 2000, we have seen that 71% of the SOEs stayed within the Top 500 after 10 years. The corresponding percentage was 52% for the private enterprises. The similar trend was followed by the cohorts of 2005 and 2010. The second positive is on a metric known as the Resource Governance Index, wherein countries have been ranked by transparency in natural resource management. India ranks amongst the top 10 countries. Globally and in India, most of the natural resources are managed by the SOEs. Indian SOEs have therefore performed better than SOEs in other countries on this metric. There is one negative as well and that is Corporate Governance. Research has been conducted by International Finance Corporation and BSE where they have given a corporate governance score to the BSE-100 companies. As expected, the multinationals and the institutionally owned and widely held organisations have high scores when it comes to corporate governance. There is a perception that family-owned businesses are relatively less transparent and therefore possibly less governed. The scores support that perception. When we look at government-owned organisations, they are a long way behind even family-owned organisations. Clearly, this is a space where the government-owned organisations can improve. There has been an improvement from 2015 to 2018, but they are still a long way behind others. I hope you will enjoy reading this publication and look forward to receiving your valuable feedback and suggestions.

Manish Sinha Managing Director – India Dun & Bradstreet

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Foreword

Dun & Bradstreet is pleased to announce the release of the twelfth edition of its premier publication, ‘ India’s Top PSUs ’. The publication provides an overview about the financial performance of the country’s top public sector undertakings (PSUs) and serves as a comprehensive ready-reckoner about this segment. PSUs are significantly contributing to the country’s economic resurgence by playing a key role in critical areas of oil & gas, power, infrastructure, defence etc. Their strong workforce and vast network has managed to create long- term relationships with various stakeholders across the country. Further, their spectrum of CSR activities becomes very important for sustainable development for the country with a population of 1.3 billion. In short, PSUs are the key enablers of inclusive development of the economy that is aspiring to touch US$ 5 trillion by 2024.

However, with rapidly changing business dynamics, these organisations have come under severe pressure due to increased competition from their private sector peers, and challenges related to productivity and efficiency. In an increasingly technology driven environment, these companies need to adopt technology solutions that not only enable them to align their organisation’s business needs but also help them achieve growth and efficiencies. They need to be flexible and agile in their approach and respond to the changing business needs through innovation, technology adoption and by deploying skilled workforce to name a few. For example, most PSUs will have large volume of data that has been collected for at least a decade. They can adopt innovative ways of analyzing customer preferences and tracking business performance, in order to take their enterprises to the next level of growth. Today, the PSUs are at a crossroad where they need to gain the competitive edge by reinventing themselves. With India as the fastest growing major economy, they can tap opportunities by leveraging on their existing strengths and adopting new strategies. The government is also taking several initiatives in terms of capital infusion, divestment, performance management and modernization to make the PSUs more competitive and thus strengthen Brand India. Dun & Bradstreet believes that by realigning their strategies they can reach to greater heights in the near future and help to strengthen Brand India. ‘ India’s Top PSUs 2019 ’ will be a valuable source of insights that will help in better understanding of the performance and achievements of PSUs. Dun & Bradstreet’s extensive reach will ensure that the publication receives the maximum exposure at the national and international level. We hope this publication is helpful and look forward to receive your feedback and suggestions.

Pankaj Khanna Head – Learning & Economic Insights Group Dun & Bradstreet India

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Executive Summary

India has emerged as the fastest growing major economy in the world. The role of the country’s Public Sector Undertakings (PSUs) in key areas of oil, energy, power, financial services and infrastructure is very critical to continue this momentum. Further, their importance to the socio economic and financial landscape is underscored by the fact that Central Public Sector Enterprises (CPSEs) provided employment to nearly 1.08 mn people and contributed ` 3.5 trillion to the central exchequer in FY18, according to statistics provided by the Public Enterprises Survey 2017-18, Ministry of Heavy Industries and Public Enterprises. The publication, ‘ India’s Top PSUs 2019 ’ is a compendium of all central public sector undertakings in India. It encapsulates the overview of the financial performance of CPSUs during FY18. It also includes the sectoral performance & contribution of the Maharatna, Navratna and Miniratna PSUs.

In the 2019 edition of the publication, Dun & Bradstreet has profiled 169 Central PSUs which comprise of 131 companies from the non-financial segment, 20 public sector banks, 8 insurance companies and 10 companies from the FIs/NBFCs segment respectively. The entire research and highlights mentioned below are based on the data of these 169 CPSUs. Mentioned below are the financial performance highlights of the featured PSUs during FY18: • The aggregate total income of the 169 profiled PSUs stood at around ` 33.7 trillion in FY18; showing a growth of nearly 8% as compared to FY17 • Petroleum – refining & marketing sector emerged as the largest contributor in the non-financial segment accounting for nearly 53% and 34% of the aggregate income and profit respectively • The eight Maharatnas and 16 Navratnas account for nearly 52% and 20% of the aggregate total income of the companies from the non-financial segment • In terms of income growth, Maharatnas and Navratnas, both grew by 11% in FY18 compared to the previous year With rapid economic reforms and a changing business environment, the PSUs are currently going through a very dynamic phase. The government is taking various initiatives to make them more competitive mostly through strategic divestment and consolidation. Going forward, they are expected to play an important role in realizing the government’s vision. Dun & Bradstreet will continue to track the performance of Central PSUs and keep the readers updated on various developments through future editions of the ‘ India’s Top PSUs ’.

Naina R Acharya Leader Learning & Economic Insights Group Dun & Bradstreet India

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Methodology

The twelfth edition of ‘ India’s Top PSUs ’ publication features 169 public sector undertakings (PSUs). The publication comprises - central public sector enterprises (CPSEs) which are a part of the Department of Public Enterprises (DPE) list (operational enterprises as on 31.03.2018); public sector scheduled commercial banks (SCBs) as defined by the Reserve Bank of India (RBI) on 31.03.2018, excluding regional rural banks (RRBs); public sector insurance companies as defined by the Insurance Regulatory and Development Authority of India (IRDAI) and other public sector NBFCs/financial institutions formed by the Act of Indian Parliament. The publication also includes a listing of state PSUs as collected from the websites of the Ministry of Corporate Affairs and Comptroller and Auditor General of India and websites of State Governments. The status of CPSEs (Maharatna, Navratna andMiniratna) is as enumerated by the DPE as on June 2019. Central public sector undertakings which have ceased to exist due to merger/amalgamation post 31.03.2018 are excluded. Central public sector undertakings, for which the government has proposed strategic disinvestment through majority stake sale, complete stake sale; merger/amalgamation, proposed to be shut down etc. are marked with * in the listings for reference. The initial selection of the PSU data was based on compilations from various sources such as the DPE, RBI, IRDAI, BSE, Dun & Bradstreet’s database and data from various ministries. The shortlisted PSUs were sent a detailed questionnaire seeking operational and financial information. This publication features PSUs with a standalone total income equal to or above ` 1 bn during FY18 as a selection criterion. Information contained in this publication has been procured from authentic and credible sources available in the public domain such as company annual reports/documents, websites, DPE and the registrar of companies. Further, companies that did not respond with critical data and/or whose information is not available in the public domain were not considered to ensure that all information contained in this publication is verified and authenticated. All the financial information in the publication is based on standalone financials as per the revised Indian Accounting Standard or old GAAP adopted by the company and available in the public domain such as from annual reports or financial statements (audited or provisional) or as disclosed by DPE in its Public Enterprise Survey 2017-18. The various financial computations are as per Dun & Bradstreet methodology and have been explained explicitly in the ‘Definitions and Calculations’ section. Each company featured in the publication has been allotted a unique identification number (D-U-N-S ® - Data Universal Numbering System). This will help readers locate and obtain full-fledged information reports on these companies from the Dun & Bradstreet database. The editorial team is confident that ‘ India’s Top PSUs 2019 ’ will prove useful. Further, we would be pleased to receive your invaluable feedback and suggestions.

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DEFINITIONS & CALCULATIONS

Definitions & Calculations This section defines financial terms and ratios used in this publication. • Total Income - Refers to the total revenue including other income as reported in the company’s stand- alone financial statements. • Net Profit - Refers to the profit after tax as reported in the company’s standalone financial statements. • Net Worth - Is the sum of share capital, equity equivalents and reserves & surplus. Equity equivalents include share warrants, ESOP etc. Debit balance appearing in the profit and loss account and foreign exchange translation reserve account, revaluation reserves, miscellaneous expenditure, and intangibles such as patents, goodwill, trademarks, copyrights, know-how, brands, licenses, rights, computer software and the likes are deducted from the Net Worth.

• Net depreciation as mentioned in profit & loss account. • Interest cost net of capitalisation wherever available

Ratios

Particulars

Formulae

EBITDA

Profit Before Tax + Interest Expense + Depreciation and Amortisation Expense

EBIT

EBITDA – Depreciation and Amortisation Expense

EBITDA Margin (%)

(EBITDA/Total Income) * 100 (Net Profit/Total Income)* 100

Net Profit Margin (NPM) (%) Return on Net Worth (%)

(Net Profit/Average Net Worth) * 100

Dividend Payout (%)

Equity Dividend/(Profit Before Tax as per Annual Report- Taxation Expense- Pref- erence Dividend)*100

Capital Employed

Long term debt + Net Worth

Return on Capital Employed (%)

(EBIT/Average Capital Employed) * 100 (PAT/Average Total Assets) * 100 (Total Debts) /Shareholder’s Fund

Return on Assets

Debt-to-Equity (times) Shareholder’s Fund

Equity Share Capital + Preference Share Capital+ Reserves and Surplus – Accumu- lated Losses – Deferred expenses Short Term Debt + Long Term Debt + Current maturities of Long Term Debt Non-Current Assets + Current Assets (excluding accumulated losses and deferred expenses)

Total Debt Total Assets

Average Total Assets Average Net worth

(Opening Total Assets + Closing Total Assets)/2 (Opening Net worth + Closing Net worth)/2

Average Capital Employed Interest Coverage (times)

(Opening Capital Employed + Closing Capital Employed) / 2

EBIT/Interest Expense

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The publication also includes terms and indicators specific to the banking sector.

Ratios

Particulars

Formulae

Total Business

As reported by the bank in its standalone financial statements OR Total Advances + Total Deposits as provided by the RBI Cash in hand + Balances with RBI + Balances with banks inside/outside India + Money at call + Investments + Advances + Fixed Assets + Other Assets

Total Assets

Net Interest Margin Net Interest Income

As reported by the bank in its standalone financial statements

Total Interest earned – Total Interest expended

Net NPA Ratio

As reported by the bank in its standalone financial statements

Return on Assets (ROA)

As provided in Company’s Annual Report

The publication also includes terms and indicators specific to the insurance sector • Net Commission Ratio as given in the Annual Report

• Solvency Ratio as given in the Annual Report • Retention Ratio as given in the Annual Report • Net Premium Earned is the sum of total of net premium earned from fire insurance, marine insurance, miscellaneous insurance and life insurance business Symbols used N.A. Not Available C/R Current Ratio

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PSU OVERVIEW

OVERVIEW OF PSUs IN INDIA

Overview of CPSEs in FY18 The Central Public Sector Enterprises (CPSEs), are playing a vital role in the socio-economic development of India. Since independence, the CPSEs have got involved in various industrial and services sectors to help correct regional imbalances as well as generate employment. They also have contributed in improvement of infrastructure, poverty reduction and thereby inclusive economic growth. As the fastest growingmajor economy in the world and aspiring to touch US$ 5 trillion, the role of CPSEs is going to be accentuated in the near future. Overview of PSUs in India

Key Details of CPSEs

Employment by CPSEs

1.08 million workforce (Excludes contractual and casual workers)

Contribution to the Central Exchequer

TAX

Rs. 3.5 trillion (Decline of 3% y-o-y)

Foreign Exchange Earnings of CPSEs Rs. 869.8 billion (Decline of 1% y-o-y)

Salaries and Wages by CPSEs Rs. 1.5 trillion

(Growth of 12% y-o-y)

Real Investment / Gross Block in CPSEs Rs. 19.8 trillion (Growth of 12% y-o-y)

Financial Investment in CPSEs Rs. 13.7 trillion

`

(Growth of 10% y-o-y)

Dividend Declared by CPSEs

Rs. 765.7 billion (Decline of 2% y-o-y)

`

Procurement from MSEs

Rs. 242 billion (Decline of 4% y-o-y)

Mou Ratings of CPSEs

Nearly 30% of 169 CPSEs scored ‘Excellent’ MoU rating in FY18 compared to 26% in FY17

CSR Expenditure by CPSEs

Rs. 34.4 billion (Growth of 3% y-o-y)

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

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Over the years, the number of CPSEs in India have grown many folds. At the time of First Five Year Plan, only five CPSEs were created with a total investment of ` 290 mn. As of March 31, 2018, the total number of CPSEs stood at 339 (out of which 257 were operational) with a total investment of ` 13,734.12 bn. Sector-wise operating CPSEs as on Mar 31, 2018

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

Financial Performance of CPSEs in FY18 Growth in aggregate turnover received some impetus

Aggregate turnover/ gross revenue from operations that witnessed a turnaround in FY17, received further impetus in FY18. The aggregate turnover registered a growth of 10.2% in FY18 as compared to 6.6% in FY17. In FY15-FY16, CPSEs were adversely impacted by the fall in global commodity prices, weak economic growth and volatile financial markets. In FY17 the turnover of CPSEs witnessed some revival albeit at low base of the previous fiscal.

Aggregate turnover of operating CPSEs

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

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Amongst sectors, manufacturing, processing and generation sector reported largest increase (12% y-o-y) in aggregate turnover, followed by mining & exploration sector (9.3%) in FY18, thereby driving growth in aggregate turnover. The agriculture sector, on the other hand, registered a sharp fall of 23.6% y-o-y in gross turnover in FY18 as compared to an increase of 34.9% in FY17. A substantial decline in the turnover of agro- based industries is indicative of distress in the agriculture sector in the country. Within manufacturing sector, a substantial growth in gross revenue of steel, petroleum (refinery & marketing), chemicals & pharmaceuticals and transportation vehicle & equipment contributed to the overall growth in turnover of manufacturing sector. A decline in turnover of industrial & consumer goods and textiles sectors can be attributed to the subdued domestic and global demand scenario.

Top five sectors cumulatively contributed 77.6% of aggregate turnover of all operating CPSEs in FY18

Sector-wise aggregate turnover/ gross revenue from operations

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

Growth in total income of CPSEs witnessed a surge In line with the top-line performance of the operating CPSEs, growth in total income/ revenue surged to 11.6% y-o-y in FY18 as against a muted 3.3% in FY17. The significant rise in total income can largely be attributed to the higher sales revenue and a decline in contribution for excise duty due to introduction of GST in Jul 2017. Nonetheless a decline in other income capped growth in total income of CPSEs.

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Total income/ revenue of operating CPSEs

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

Net profits of the operating CPSEs remained muted on the back of higher input costs The aggregate net profit of operating CPSEs has witnessed a declining trend in the last three years. In FY15, aggregate net profits reported a decline of almost 20% y-o-y on account of the fall in export earnings. However, aggregate net profits rebounded in FY16 primarily due to a steep decline in rawmaterial costs. The lower input prices continued to support CPSEs in FY17 as well. In FY18, however, rise in global rawmaterial costs and crude oil prices pulled down growth in aggregate net profits. The raw materials cost for CPSEs registered a growth of almost 15.3% y-o-y in FY18.

Aggregate net profit of operating CPSEs

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

Profit/ loss making CPSEs – Key Highlights Profit-making CPSEs

Loss-making CPSEs

FY18 FY17

FY18 FY17

No of loss-making CPSEs

71

81

No of profit-making CPSEs

184

175

ñ ñ

ñ ò

Loss of loss-making CPSEs

312.6 274.8

Profit of profit-making CPSEs ( ` bn) 1596.4 1529.8

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

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Within sectors, manufacturing, processing & generation sector reported moderation in growth of aggregate net profits to 6.1% y-o-y in FY18 from 33.2% in FY17. This was due to a substantial moderation in growth in aggregate profits of petroleum (refinery & marketing) and heavy & medium engineering sectors. Sectors like steel, chemicals & pharmaceuticals, industrial & consumer goods and textiles on the other hand witnessed aggregate net loss on account of higher raw material costs and subdued demand conditions. Services sector reported 10.7% y-o-y growth in aggregate net profits in FY18. However, this came on the back of low base of the previous year (-16.7% in FY17). The telecommunication & information technology sector reported an aggregate net loss of ` 107.3 bn in FY18 as against ` 74.5 bn in FY17, accounting for almost one- third of the net loss of loss-making CPSEs in FY18.

Top 3 profit making sectors (in profit-making CPSEs)

Top 3 loss making sectors (in loss-making CPSEs)

Net profit of profit- making CPSEs (% share)

Net loss of loss-making CPSEs (% share)

Sector

Sector

Petroleum (refinery & marketing)

Telecommunication & information technology Transport & logistic services

1

25.6

1

35.1

2

Crude Oil

14.8

2

19.6

3

Power Generation

13.5 53.9

3

Coal

13.0 67.7

Total (1 to 3)

Total (1 to 3)

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

CPSEs contribution to central exchequer declined in FY18 In FY18, there was an introduction of Goods & Services Tax (GST) in July 2017 which subsumed majority of indirect taxes like service tax, central excise and value added tax, amongst others. As a result, contribution in terms of taxes and duties declined by 2.5% y-o-y in FY18 as against an increase of 39.2% y-o-y in FY17. This coupled with a lower dividend on central government equity and contribution in terms of interest resulted in reduction in overall contribution to central exchequer. The total contribution of CPSEs to the central exchequer during FY18 declined by 3.0% y-o-y as against an increase of 30.8% y-o-y in FY17. Real investment/ gross block in CPSEs witnessed a strong growth in FY18 The aggregate real investment in CPSEs measured in terms of gross blocks registered a growth of 12.1% y-o-y in FY18 as against 6.3% in FY17. The accumulated real investment in CPSEs stood at ` 19,846.2 bn in FY18 as against ` 17,701.9 bn in FY17. Amongst sectors, manufacturing, processing & generation sector has a major share of 45% in real investment, followed by services and mining & exploration sectors with shares of 33% and 20% respectively.

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Accumulated real investment/ gross block in CPSEs

Source: Public Enterprises Survey 2017-18, Department of Public Enterprises

Performance of CPSEs with Ratna-status CPSEs are further categorised into three levels namelyMaharatna, Navratna andMiniratna. This classificationwas introduced by the government in order to make promising profit-making CPSEs more efficient and competitive. CPSEs under these categories are delegated with enhanced autonomy and financial powers subject to certain eligibility criteria. As of Jun 2019, 8 CPSEs fall under Maharatna category, 16 CPSEs fall under Navratna category and 73 CPSEs fall under Miniratna category. Maharatna account for over 50% of share in total income of Ratna-status CPSEs. In FY18, total income of Ratna- status CPSEs increased by 10.4% y-o-y as compared to 8.1% y-o-y in FY17, largely driven by the growth in total income of Maharatna and Navratna CPSEs.

Maharatna and Navratna CPSEs driving growth in total income of Ratna category CPSEs

Source: D&B Research

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Growth in PAT of Ratna category CPSEs moderates substantially in FY18

Source: D&B Research

In line with other CPSEs, growth in PAT of Ratna-status CPSEs also moderated to 1.2% y-o-y in FY18 as against 17.7% in FY17. WhileMiniratna CPSEs registered a decline in PAT (-24.8% y-o-y), Maharatna CPSEs also reported a substantial moderation in PAT, which grew by mere 5.3% y-o-y in FY18 as against 18.1% in FY17. A double digit growth in PAT of Navratna CPSEs provided some cushion to the overall growth in PAT of Ratna-status CPSEs.

Net worth of Ratna category CPSEs exhibit moderate growth in FY18

Source: D&B Research

Net worth of Ratna-status CPSEs has registered a CAGR of around 5% during FY14-FY18.

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Disinvestment in PSUs The government achieved the disinvestment target of ` 1000 bn in FY18. In FY18, disinvestment target had been raised by 77% from the previous year.

Trends in PSU disinvestment targets and achievements

* FY16 disinvestment target excludes strategic disinvestment of ` 285 bn ** FY17 disinvestment target includes ` 360 bn as disinvestment of CPSEs and ` 205 bn from strategic disinvestment *** FY17 disinvestment achievement includes ` 354.68 bn from disinvestment of CPSEs and ` 107.79 bn from disinvestment of strategic

holdings and income from management of SUUTI investment Source: Department of Investment and Public Asset Management

Key policy decisions in FY18-19 The key policy decisions taken by the government with regards to PSUs are listed below.

Disinvestment Policy • InMar 2019, the government approved procedure and mechanism for strategic disinvestment of the PSUs. As per the decision, the alternativemechanismhas nowbeen delegated powers to decide quantumof shares to be transacted, the mode of sale and final pricing on any strategic disinvestment case where government has given its ‘in principal’ approval. The mechanismwill also lay down the principles and guidelines for such pricing and also select the strategic partner finalizing the terms and conditions of sale. It will also decide on the proposals of Core Group of Secretaries on Disinvestment (CGD) with regard the timing, price, the terms and conditions of sale and any other related issue to the transaction. This is expected to facilitate quick decision-making and obviate the need for multiple instances of approval by the government for the same PSU. Earlier in August 2017, the government had approved setting up of an Alternative Mechanism (AM) to decide on the matters relating to terms and conditions of the sale from the stage of inviting of Express of Interests (Eols) till inviting of financial bid. • The government has approved listing of 18 PSUs on stock exchanges to unlock the value of the company, facilitate resource mobilisation, encourage public participation through ‘people’s ownership’ and promote corporate governance norms in these PSUs. The government has approved listing of PSUs in sectors like railways, defence, power, steel, renewable energy and insurance. The Government has also unveiled a mechanism/procedure along with indicative timelines for listing of CPSUs.

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Budget Proposals FY20 • The target of ` 1,050 bn of disinvestment receipts set for FY20. • The budget proposed to reinitiate the process of strategic disinvestment of Air India and to offer more PSUs for strategic participation by the private sector. • The government to consider going to an appropriate level below 51% in PSUs where the government control is still to be retained, on case to case basis. • The present policy of retaining 51% government stake to be modified to retaining 51% stake inclusive of the stake of government-controlled institutions. • The budget proposed to meet public shareholding norms of 25% for all listed PSUs and raise the foreign shareholding limits tomaximumpermissible sector limits for all PSU companies which are part of Emerging Market Index. • The budget proposed to apply concessional rate of short-term capital gains tax to fund of funds set up for disinvestment of Central Public Sector Enterprises (CPSEs), to which concessional rate of long-term capital gains tax has already been extended. • New Space India Limited (NSIL), a PSU, was incorporated as a new commercial arm of ISRO. Other policy initiatives in FY18 • The government and market regulators have taken measures for development of monetisation vehicles Infrastructure Investment Fund (InvIT) and Real Investment Trust (ReITs) in India. • The proposals for diversification of portfolios to maintain business performance were taken up by the Boards of PSUs. In addition, the Boards of Maharatna and Navratna PSUs have been delegated powers, inter-alia, to (i) incur capital expenditure without government approval on purchase of new items or for replacement, to take up new projects, modernization, etc., (ii) make equity investment to establish financial joint ventures and wholly owned subsidiaries, and (iii) undertake mergers & acquisitions subject to laid down conditions. The Boards of Maharatna and Navratna PSUs have also been delegated powers to raise debt from domestic and international markets. • After merger of the State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Patiala, State Bank of Hyderabad and Bharatiya Mahila Bank with the State Bank of India on April 1, 2017, the government approved amalgamation of Dena Bank and Vijaya Bank with Bank of Baroda w.e.f. April 1, 2019. Some of the key financial performance highlights of the featured 169 PSUs during FY18 are:- • The aggregate total income of the 169 profiled PSUs stood at around ` 33.7 trillion in FY18; showing a growth of nearly 8% as compared to FY17 • Petroleum– refining &marketing sector emerged as the largest contributor in the non-financial segment accounting for nearly 53% and 34% of the aggregate income and profit respectively • The eight Maharatnas and 16 Navratnas account for nearly 52% and 20% of the aggregate total income of the companies from the non-financial segment • In terms of income growth, Maharatnas and Navratnas, both grew by 11% in FY18 compared to the previous year

22

23

WHERE DOES INDIAN SOEs STAND GLOBALLY? Globally, SOEs have always been doing better in terms of contribution to social value creation.However,UK has been able to achieve both in terms of social and monetary value creation Public sector enterprises, excluding banks and insurance companies, are referred as SOEs for the purpose of the analysis. Brief Snapshot of CPSEs

6.0

Saudi Arabia

Enterprise value per employee and employment per state owned company

2.0

Greece

1.5

Korea

China

1.0

Iceland

New Zealand

Netherlands

United Kingdom

Denmark Finland

0.5

Spain

Canada

Switzerland

Japan

Italy

Australia Brazil Germany

Turkey

India

France

Austria

United States

Poland

0.0

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

No of employees per SOEs

Source: OECD, Data is for 2015

CONTRIBUTIONOF INDIAN SOEs TO US$ 5 TRILLION ECONOMY Being the strategic players SOEs need to start increasing their financial contribution and meet the target of contributing to 10% to India’s GDP by FY25 from the current of around 5%

SOEs contribution to India’s GDP

11%

10%

9%

8%

7%

6%

5%

4%

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Historical trend Desired future trend

Source: Department OfPublic Enterprises Note:GDP Contribution data is for 339SOEs. Excludesbanks and insurancecompanies.GDP per company is thesummationof PAT,wages,rent, interestand depreciation

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CONCENTRATIONOF CONTRIBUTIONTOGDP Only 10% of the SOEs have more than 100% share in overall SOEs contribution to GDP. The contribution from others must increase

No. of SOEs - 339 % share of SOEs

% share of each SOE in Total GDP generated by SOEs

Note:GDP Contribution data is for 339SOEs. Excludesbanks and insurancecompanies.

Source: Department OfPublic Enterprises

PSU Awards 2019

GROWTHOF CONTRIBUTION BY SOEs AND OTHER SECTORS By FY25, contribution of SOEs has to be 4.2 times the current level while contribution by the rest of the economy has to be only 1.8 times the current level

FY25 (US$ tn)

Growth (in times)

FY18 (US$ tn)

5.00

1.9

2.65

India

1.8

4.50

Other sectors

2.53

4.2

0.12

0.50

SOEs

Source: RBI,MOSPI, DepartmentOfPublic Enterprises Note:GDP Contribution data is for 339SOEs. Excludesbanks and insurancecompanies.

25

AREASTO STRENGTHEN FOR SOEsTO CREATEA HOLISTIC ECO-SYSTEMTO BENEFITTHE NATION SOEs over the years played a critical role in the development of the nation. Now, SOEs are required to create a holistic eco-system to benefit the nation, in terms of monetary and societal value creation and also helping the MSMEs to grow. Various research and the Government has highlighted areas for SOEs to strengthen, 4 broad areas stand out. While SOEs are doing well in some areas, there is scope for improvement in others

PREPARE

PROCUREMENT

PERFORMANCE

PROCESS

• Consistency

• Transparency & Accountability • Resource Governance

• MSMEs

• Tech Disruption

Source: PIB (PSUConclave 2018)

PERFORMANCE When we look at the performance of the Top 500 companies (based on Income), the SOEs have demonstrated a steady performance as compared to the private sector

Consistency in Performance

100%

100%

100%

90%

90%

90%

83%

80%

80%

80%

70%

71%

70%

70%

60%

60%

60%

60%

51%

50%

50%

50%

40%

40%

40%

1 2 3 4 5 6 7 8 9 10 11 12 13 2000: SOEs 2000: Others

1 2 3 4 5 6 7 8 9 10 11 12 13 2010: SOEs 2010: Others

1 2 3 4 5 6 7 8 9 10 11 12 13 2005: SOEs 2005: Others

Note: Rankingof Top 500 firms is based on total income where data was publicly available. Data taken from CMIE Prowess. No.ofYears

Source: CMIE, D&B Analysis

26

PROCESS A report on corporate governance practices of BSE-100 companies across 4 segments; Right and equitable treatment of shareholders, Role of stakeholders, Disclosures and transparency and Responsibilities of the board, shows that corporate governance scores varies across different ownership companies. SOEs scores are lower compared to others

Corporate Governance Scores of BSE-100 companies

65

2018

2015

64

64

61

59

58

51

48

Multinationals

Institutionally owned and widely Held

Family Owned

Government owned

Source: A report by IFC, BSE and IiAs onCorporate Governance score, 2019 Note: Data for India is for 2018 for 56 listed companies, excluding banks and for the rest of the countries is 2015, Data for CG compliance excludes banks

PROCESS Natural resources are critical as they are inputs to almost every physical product manufactured. SOEs across countries have around 80% share in production of natural resources*. It is important to have transparency in resource management as extraction of natural resources is one of the most politically, socially and economically complex undertakings. It is gratifying that India scores a high value in the Resource Governance Index

Resource Governance Index Score (100 is best 0 is worst)

Transparency in resource management

Good Satisfactory Weak Poor Failing

0 10 20 30 40 50 60 70 80 90

Source: Natural Resource Governance institute, 2017,The Resource Governance Index assesses policies and practices that authorities employ to govern their countries’ oil, gas andmining industries. Note: Resource governance index is based on 3 components i.e. value realisation, revenue management andenabling environment. * represents oiland natural gas production

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PROCUREMENT A strong MSME eco-system would be critical to achieve a US$ 5 tn economy. SOEs have been helping in strengthening the capabilities of MSMEs through backward and forward linkages, collaboration and competition. Around 60% of SOEs who reported their data in FY18, procured more than 20% from MSMEs in 2018. Now with increased target of 25% procurement from MSMEs, the expectations from SOEs has increased

Share of SOEs procuring from MSMEs

33%

59%

67%

41%

FY16

FY18

<=20% Above 20%

Source: Department OfPublic Enterprises

PREPARE The adaptability of the 4 th industrial revolution will depend on all stakeholders, including the government.India’s improvement in rank of 21 in 2018 from 26 in 2017 among 135 countries in the parameter ‘Future Orientation of the Government’ indicates a supportive environment

Future orientation of the government score (100 is best 0 is worst)

0 10 20 30 40 50 60 70 80 90

Source: World Bank, GlobalCompetitiveness Index

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29

SPECIAL SECTION

• CSR INITIATIVES • SWACHH BHARAT INITIATIVES • DIGITAL INITIATIVES • EMPLOYEE WELFARE INITIATIVES • EXPORT PERFORMANCE

CSR Initiatives

CSR – Working beyond business interests The enactment of Companies Act, 2013 by the Ministry of Corporate Affairs, GoI was the introduction of CSR as a mandatory provision by imposing statutory obligation on Companies to take up CSR projects towards social welfare activities. This action propelled India to be the only country having regulated and mandated CSR for selected categories of companies registered under the Act. This CSR initiative is expected to help the country in achieving sustainable development goals and public-private partnership in transforming India. The 21st Report of the Parliamentary Standing Committee on Finance was one of the major initiators for bringing the CSR provisions within the statute. It was thereby observed that annual statutory disclosures on CSR presented by the companies would help to check on non-compliance. According to the legislation/act: • Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a CSR Committee of the Board with three or more directors and shall disclose the composition of the CSR Committee • The CSR Committee shall formulate and recommend a CSR Policy indicating the activities to be undertaken by the company as specified along with recommending the amount of expenditure to be incurred on the activities. The CSR policy need to be regularly monitored • The Board of every company after taking into account the recommendations made by the CSR Committee, approves the CSR Policy for the company and accordingly discloses contents in its report and the company’s website • The Board of every company shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years. In the report, the Board shall specify the reasons for not spending the amount, on account of the company failing to spend such amount • The company shall give preference to locality/areas around which it operates, for conducting CSR activities

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Development Sector-wise expenditure FY15 to FY18

Amount Spent (in ` mn)

Development Sectors

FY15 54.7

FY16 328.2

FY17 243.7

FY18 21.1

Clean Ganga Fund

Education, Differently Abled, Livelihood

31,880.9 49,425.5 55,112.9 34,867.6

Encouraging Sports

576.1 1,389.20 1,785.20

1.219.4

Environment, Animal Welfare, Conservation of Resources

8,539.9

9,723.4 13,111.5 10,063.6

Gender Equality, Women Empowerment, Old Age Homes, Reducing Inequalities Health, Eradicating Hunger, Poverty and Malnutrition, Safe Drinking Water, Sanitation

1,899.2

3,424.6

4,634.9

2,747.9

25,259.2 46,075.1 36,401.9 17,735.3

Heritage Art And Culture

1,173.7

1,190.8

3,044.2

2,124.2

Other Sectors (Technology Incubator and Benefits to Armed Forces and Admin Overheads)

95

379.1

601.7

214.4

Prime Minister’s National Relief Fund

2,281.8

2,172.3

1,575.8

604

Rural Development

10,593.4 13,790.8 15,489.4 10,665.1

Slum Area Development

1,011.4 1,138.6 2,770.9

143

514.6

47.0

Swachh Bharat Kosh

3,251.9 3,329.1

1,838.3 4,179.8 3,889.5

1,186.9 2,156.6

Any Other Fund

NEC/ Not Mentioned

13,383.9 10,652.2

-

Total

100,659.3 143,662.9 134,646.0 83,653.5

Source: National CSR, Ministry of Corporate Affairs, GoI

• In FY18, 606 companies spent a total of ` 39,650 mn across districts in PAN India mainly on the development of the education, rural development projects and environmental sustainability sectors • In FY18, 960 companies incurred a CSR expenditure of ` 14,303.8mn across 37 districts inMaharashtra and the amount was mainly spent on the development of the education, health care and rural development projects sectors • With an expenditure of ` 5,963.7 mn, a total of 350 companies undertook CSR projects/program’s across 28 districts in Karnataka. These projects catered to the development of the education, rural development projects and environmental sustainability sectors

Top 10 states in terms of CSR Expenditure in FY18

Amount spent in FY18 (in ` mn)

States

Maharashtra

14,303.8 5,963.7 3,767.4 3,089.1 2,232.2 1,571.3 1,363.3 3,521

Karnataka

Gujarat

Tamil Nadu

Odisha

Delhi

West Bengal

Rajasthan

Uttar Pradesh

1,226

Telangana 1,199.8 Source: National CSR, Ministry of Corporate Affairs, GoI

CSR Expenditure by CPSEs during FY18 During FY18, 153 CPSEs incurred a spending of ` 34,424.2 mn on CSR activities and projects. The top two development sectors in terms of receiving funding from CPSEs were eradicating hunger and poverty, health care and sanitation sector (33%) along with education and skill development sector (32%). The following table represents the break-up of CSR expenditure by CPSEs based on various activities:

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