Centre to rate PSUs on capital mgmt, investor concalls among new parameters

The number of times public sector undertakings (PSUs) have held conference calls with investors, their capital management, and debt financing are among the parameters that the Centre will use to judge their performance for the first time, a senior official in the know said.

The government will evaluate PSUs for FY22 based on new parameters that were finalised by the Department of Public Enterprises (DPE) in consultation with the Department of Investment and Public Asset Management (DIPAM) last year, the official said.

The government had included more conditions in the memorandum of understandings (MoUs) — used to set annual targets — that public sector enterprises sign with the DPE every year. These included a consistent dividend policy, which seeks to transfer dividends by PSUs every quarter; and market capitalisation or share price improvement over the sectoral index on an annual average basis for listed companies. 

PSUs also have to comply with asset monetisation targets set collectively by their administrative ministry.

Besides these and production- and capex-linked goals, the Centre will also judge them on investor concalls they have held after announcing their financial performance, among others. PSUs have been told to hold investor concalls every time they declare their earnings, and consider ideas and feedback proposed by analysts and investors, the official said.

“Many well-performing PSUs have not been doing so out of habit. After listing, they had to hold such investor/analyst calls, and are now witnessing an increase in their stock prices based on management outlook and commentary,” the official said.

PSUs have also been told to adhere to better capital management practices, and would be evaluated on the same, the official said. State-run enterprises have been asked to opt for debt financing, whenever required, as against utilising internal accruals for funding projects. 

“Better analysis must be undertaken to seek tax exemption benefits that companies would get by raising debt as against utilising internal accruals to fund projects,” the official said. 

These parameters would ensure better utilisation of available resources for PSUs and nudge them to not shy away from raising debt. All the targets are aimed at better functioning of PSUs with best corporate governance practices, and at the same time be value accretive for their shareholders.

To give a leg up to micro, small and medium enterprises (MSMEs), procurement from the Government e-Marketplace (GeM) portal has been made mandatory for PSUs. Government-owned companies would be reviewed based on procurement from GeM as a percentage of total procurement last year. 

Separately, evaluation would also be done based on procurement from MSMEs and timely payments made to them. Research and innovation, and steps taken for health and safety improvement of human resources have also been added for compliance by PSUs.

There are unsettled issues in public procurement that continue to exist even after the government's intervention, and the Centre is trying to resolve them by imposing these parameters on PSUs, said N R Bhanumurthy, vice chancellor at Dr B R Ambedkar School of Economics University, Bengaluru.

“Even after public listing of PSUs on exchanges, the government would want these PSUs to perform well even after they are handed over to private hands post privatisation,” said Bhanumurthy.

Meeting all these targets would ensure future sustainability and also fix the existing weakness in the corporate governance practices of PSUs, Bhanumurthy added.