Manish Sinha Managing Director Dun & Bradstreet India August 2019 PSU Awards 2019
ROLE OF STATE-OWNED ENTERPRISES (SOEs) State-Owned Enterprises (SOEs) are considered as strategic actors of the economy and have contributed significantly in nation-building and societal value creation since independence Sustainable economic growth with Self-reliant economic growth social perspective Balanced regional development Promote redistribution of income/wealth Note: SOEs are the public sector enterprises, excluding banks and insurance Source: D&B Analysis PSU Awards 2019
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 6.0 Saudi Arabia Enterprise value per employee and employment per state owned company 2.0 2.0 Enterprise value per employee US$ million Greece 1.5 Korea China 1.0 Iceland New Zealand Netherlands United Kingdom Denmark Finland 0.5 Spain Canada Switzerland Italy Japan Australia Turkey Brazil Germany 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 PSU Awards 2019
CONTRIBUTION OF 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 Note: GDP Contribution data is for 339 SOEs. Excludes banks and insurance companies. GDP per company is the summation of PAT, wages, rent, interest and depreciation Source: Department Of Public Enterprises PSU Awards 2019
CONCENTRATION OF CONTRIBUTION TO GDP 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 T otal GDP generated by SOEs Note: GDP Contribution data is for 339 SOEs. Excludes banks and insurance companies. Source: Department Of Public Enterprises PSU Awards 2019
GROWTH OF 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 FY18 FY25 Growth (US$ tn) (US$ tn) (in times) India 5.00 1.9 2.65 Other 1.8 4.50 2.53 sectors 4.2 SOEs 0.12 0.50 Note: GDP Contribution data is for 339 SOEs. Excludes banks and insurance companies. Source: RBI, MOSPI, Department Of Public Enterprises PSU Awards 2019
AREAS TO STRENGTHEN FOR SOEs TO CREATE A HOLISTIC ECO-SYSTEM TO BENEFIT THE 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 & MSMEs • • • Tech Disruption Accountability • Resource Governance Source: PIB (PSU Conclave 2018) PSU Awards 2019
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% % companies featured in Top 500 100% 90% 90% 90% 80% 80% 80% 70% 70% 70% 60% 60% 60% 50% 50% 50% 40% 40% 40% 1 2 3 4 5 6 7 8 9 10 11 12 13 1 2 3 4 5 6 7 8 9 10 11 12 13 1 2 3 4 5 6 7 8 9 10 11 12 13 2000: SOEs 2000: Others 2005: SOEs 2005: Others 2010: SOEs 2010: Others (68 nos.) (63 nos.) (58 nos.) No. of Years Note: Ranking of Top 500 firms is based on total income where data was publicly available. Data taken from CMIE Prowess. Source: CMIE, D&B Analysis PSU Awards 2019
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 Family Owned Government owned widely Held 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 Source: A report by IFC, BSE and IiAs on Corporate Governance score, 2019
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 90 Satisfactory 80 Weak 70 Poor 60 50 Failing 40 30 20 10 0 Norway Ukraine Canada US (Gulf of Mexico) Brazil Colombia India Indonesia Ghana Trinidad and Tobago Mexico Argentina Kazakhstan Tunisia Malaysia Cote d'Ivoire China Cameroon Ecuador Kuwait Bolivia Tanzania Oman Mozambique Timor-Leste Ukraine Vietnam Azerbaijan Russia Uganda Qatar United Arab Emirates Nigeria Congo Bahrain Egypt Iraq Iran Gabon Cuba Bangladesh Saudi Arabia Angola Chad Algeria Venezuela South Sudan Myanmar Yemen Uzbekistan Congo Equatorial Guinea Sudan Libya Turkmenistan Note: Resource governance index is based on 3 components i.e. value realisation, revenue management and enabling environment. * represents oil and natural gas production Source: Natural Resource Governance institute, 2017, The Resource Governance Index assesses policies and practices that authorities employ to govern their countries’ oil, gas and mining industries. PSU Awards 2019
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% No of companies = 164 No of companies = 129 59% 67% 41% FY16 FY18 <=20% Above 20% Source: Department Of Public Enterprises PSU Awards 2019
Source: World Bank, Global Competitiveness Index Government’ indicates a supportive environment improvement in rank of 21 in 2018 from 26 in 2017 among 135 countries in the parameter ‘Future Orientation of the The adaptability of the 4 th industrial revolution will depend on all stakeholders, including the government. India’s PREPARE Score 10 20 30 40 50 60 70 80 90 0 Singapore United States score (100 is best 0 is worst) Future orientation of the government Saudi Arabia Oman Malaysia Finland Germany New Zealand Sweden Denmark India Malta United Kingdom Tajikistan Canada Iceland Seychelles Australia Gambia, The Kazakhstan Ghana Senegal Tanzania France Korea, Rep. Jordan Pakistan Chile Egypt Uganda Armenia Georgia Côte d'Ivoire Taiwan, China Burkina Faso Bangladesh Uruguay Viet Nam Philippines Benin Serbia Argentina Slovenia Cambodia Spain Liberia Romania Mali Iran, Islamic Rep. Dominican Republic Czech Republic Colombia Kyrgyz Republic Malawi Peru Latvia Paraguay Ukraine Mozambique Trinidad and Tobago Nigeria Guatemala Italy Congo, Democratic Rep. Brazil PSU Awards 2019 Haiti Croatia Mauritania El Salvador Venezuela
SUMMARY PSU Awards 2019
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