Presented By : Aashima Arora C 03 Animesh Bharti C 08 Lavanya K.

C 19 Ankita Pandey C 33 Kala Swaraj C 53

What is a PSU ?
Government

owned enterprise Majority stake (more than 51%) held by govt Classified into three types : a) CPSE b) PSE c) PSB

PRIVATISATION
Privatization

is defined as transfer of ownership and management of enterprises from the public to private sector. Relatively new concept, originated in 1980s The term coined by Peter F Drucker Margaret Thatcher : Gave it an identity in practical terms

Reasons For Privatisation

Inefficient Management Price Policy Political factors influencing decision Excess Manpower

Delay in completion & high cost

Goals Of Privatisation
Reduce governments role in the economy
Obtain the sales proceeds & use them to finance government debt

Share ownership

Goal

WHY PRIVATISATION

Inability to improve management system and respond to challenges of globalisation Inability to be flexible and efficient in the face of competition.eg BSNL Inability to sustain long term funding of losses of PSU Deregulation of industry, in order to enable firms in the public sector to compete & survive

Why privatisation (contd...)

Exposing firms to market discipline and promoting wider share ownership. The need to raise FDI for increased in the country. It injects new value into public assets and increases privately held capital base of country Liquidity constrained government facing fiscal pressure in a view to finance fiscal deficits.eg argentina in 1989

PROBLEMS FACED BY PSUs

POLITICAL INTERFERENCE HIGH COST OF DELAY FEAR OF SCAM

Contd
INEFFECTIVE MANAGEMENT TRADE UNIONISM HEADLESS PLANTS

Contd
UNUTILISED CAPACITIES

UNIMAGINATIVE PRODUCTION

Eg-surgical instruments plant, Chennai

2007

offered postal and package delivery services, banking services, and life insurance
over 400,000 employees and ran 24,700 post offices throughout Japan Japan Post also held about 140 trillion (one fifth) of the Japanese national debt in the form of government bonds government-owned corporation from 20032007, nation's largest employer On October 1, 2007 Japan Post was privatized following fierce political debate that was settled by the 2005 general election

Lagan Jute Machinery Corporation Limited

First Successful Privatisation in India
Calcutta based company Manufactured jute machinery

Growth Opportunity
High Potential company with good quality products Only supplier of its type

Privatised in 1997 with 74% stake to strategic partner

Retained initial senior management Industry Expert hired & made the MD of LJMC

LJMC BEFORE & AFTER PRIVATISATION

Particulars Gross Turnover Profit/Loss Orders Booked Export of Spares Pre-privatisation Rs 6 million Incurred Loss Rs 12 Million Rs 0.5 Million Post -privatisation Rs 24 Million Showed Profit Rs 15 Million Rs 1.6 Million

Source : http://www.divest.nic.in/chap10-old.asp

Disinvestment In PSUs

Infuse New Capital

New technolo gy

Need originated as PSUs till 1991 had negative ROR New Managem Affected as per Statement of Industrial ent Policy 1991 Part of Government shareholding thrown open to other financial institutions Primary Objective was to raise capital for further growth & convert them from liabilities into assets

Methods Of Disinvestment
Cross Holdings Strategic Sale Management Employee Buyout

Reduction in Equity

Capital markets

PSUs Undergone Disinvestment

NAME BALCO Maruti Udyog Ltd. HCI Hotels ITDC IPCL VSNL Lagan Jute Machinery Corp % OF GOVT EQUITY SOLD 51 4 100 51 26 25 74 STATUS DURING DISINVESTMENT Profit making Profit making Loss making Loss making Profit making Profit making Loss making