Investors in the stock market tend to give lower valuations to public sector firms than they do to private companies. There are multiple reasons why state-run companies get lower valuations, including their public sector character, which often makes competing in the market more difficult. It was recently reported that central public sector enterprises (CPSEs) have been asked, starting next fiscal year, to target growth of 10 per cent in their market capitalisation every year. It shouldn’t be surprising that CPSEs and their administrative ministries are not pleased by this direction. However, a section of decision-makers in the government seems determined to increase the valuation of CPSEs. As reported by this newspaper on Monday, the government has now asked CPSEs to state the market value of their land and other real estate holdings. This would arguably lift market confidence in these firms.
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