Have PSUs created more value for investors vis-a-vis their private counterparts?

It is a general perception that the companies in the private sector perform better compared to the government-owned companies. At least the Asset management stock market valuations reflect this belief. However, that depends on the parameters one uses to measure performance. If growth were the primary parameter-as most of the stock market players blindly believe, the private sector companies may be regarded as the best investments for investors. However, the true value of the conservative approach of the public sector enterprises (PSEs), in the form of stability and unleveraged balance sheet, comes to the fore particularly in the times like last year when India Inc. was marred with a global economic crisis and credit crunch at home.

From the point of view of the shareholders' decision to stay invested in PSEs was well rewarded. The net profit generated by these companies as a percentage of shareholders' cumulative investment, the return on net worth -stood the highest at 15.8%, whereas, the group of MNCs was at 15.2% and the private companies was at 14.2%. On this debt-to-equity ratio, the PSEs at 0.89 fare better than the domestic private companies that have borrowings of Rs 1.34 against every rupee invested by shareholders.

This detailed analysis reveals the value that lies hidden in the stability of the PSEs. The PSEs could weather the storm better mainly due to their conservative approach. Such a strategy may affect growth in the short term, but builds in enormous investor value by cutting down on investment risk. An investor must realise that a high-speed growth has its own inherent risks and hence the PSEs' strategy that does away with all that uncertainty is a point to take home.

So friends, have PSUs created more value for investors vis-a-vis their private counterparts?