PSU Awards 2019

Manish SinhaManaging Director

Dun & Bradstreet IndiaAugust 2019

ROLE OF STATE-OWNED ENTERPRISES (SOEs)

PSU Awards 2019

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 social perspective

Self-reliant economic growth

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

Source: OECD, Data is for 2015

No of employees per SOEs

Ente

rpris

e va

lue

per e

mpl

oyee

US$

mill

ion

Australia

AustriaBrazil

Canada

China

DenmarkFinland

FranceGermany

Greece

Iceland

India

Italy Japan

Korea

NetherlandsNew Zealand

Poland

Spain Switzerland

Turkey

United Kingdom

United States0.0

0.5

1.0

1.5

2.0

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Saudi Arabia

2.0

6.0Enterprise value per employee and employment per state owned company

PSU Awards 2019

4%

5%

6%

7%

8%

9%

10%

11%

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Historical trend Desired future trend

SOEs contribution to India’s GDP

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%

Source: Department Of Public EnterprisesNote: 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

PSU Awards 2019

CONCENTRATION OF CONTRIBUTION TO GDPOnly 10% of the SOEs have more than 100% share in overall SOEs contribution to GDP. The contribution from others must increase

Source: Department Of Public Enterprises

No. of SOEs - 339% share of SOEs

% share of each SOE in Total GDP generated by SOEs

Note: GDP Contribution data is for 339 SOEs. Excludes banks and insurance companies.

PSU Awards 2019

5.00

4.50 1.8

1.9

4.2

2.53

2.65India

Other sectors

SOEs

FY18 (US$ tn)

FY25 (US$ tn)

Growth (in times)

0.12 0.50

GROWTH OF CONTRIBUTION BY SOEs AND OTHER SECTORSBy 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

Source: RBI, MOSPI, Department Of Public EnterprisesNote: GDP Contribution data is for 339 SOEs. Excludes banks and insurance companies.

PSU Awards 2019

Source: PIB (PSU Conclave 2018)

PROCESS

• Transparency &

Accountability

• Resource Governance

PROCUREMENT

• MSMEs

PREPARE

• Tech Disruption

PERFORMANCE

• Consistency

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 aholistic eco-system to benefit the nation, in terms of monetary and societal value creation and also helping theMSMEs to grow. Various research and the Government has highlighted areas for SOEs to strengthen, 4 broad areasstand out. While SOEs are doing well in some areas, there is scope for improvement in others

PSU Awards 2019

Source: CMIE, D&B Analysis

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13

2000: SOEs 2000: Others

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13

2005: SOEs 2005: Others

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13

2010: SOEs 2010: Others

Note: Ranking of Top 500 firms is based on total income where data was publicly available. Data taken from CMIE Prowess.No. of Years

Consistency in Performance

% co

mpa

nies

feat

ured

in To

p 50

0 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

(68 nos.) (63 nos.) (58 nos.)

Corporate Governance Scores of BSE-100 companies

2015 2018

PROCESS

A report on corporate governance practices of BSE-100 companies across 4 segments; Right and equitable treatment ofshareholders, Role of stakeholders, Disclosures and transparency and Responsibilities of the board, shows that corporategovernance scores varies across different ownership companies. SOEs scores are lower compared to others

Source: A report by IFC, BSE and IiAs on Corporate Governance score, 2019 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

59

64

58

48

6564

61

51

Multinationals Institutionally owned andwidely Held

Family Owned Government owned

PSU Awards 2019

GoodSatisfactoryWeakPoorFailing

Transparency in resource management

0

10

20

30

40

50

60

70

80

90

Norw

ayUk

rain

eCa

nada

US (G

ulf o

f Mex

ico)

Braz

ilCo

lom

bia

Indi

aIn

done

siaGh

ana

Trin

idad

and

Tob

ago

Mex

icoAr

gent

ina

Kaza

khst

anTu

nisia

Mal

aysia

Cote

d'Iv

oire

Chin

aCa

mer

oon

Ecua

dor

Kuw

ait

Boliv

iaTa

nzan

iaOm

anM

ozam

biqu

eTi

mor

-Les

teUk

rain

eVi

etna

mAz

erba

ijan

Russ

iaUg

anda

Qat

arUn

ited

Arab

Em

irate

sNi

geria

Cong

oBa

hrai

nEg

ypt

Iraq

Iran

Gabo

nCu

baBa

ngla

desh

Saud

i Ara

bia

Ango

laCh

adAl

geria

Vene

zuel

aSo

uth

Suda

nM

yanm

arYe

men

Uzbe

kist

anCo

ngo

Equa

toria

l Gui

nea

Suda

nLib

yaTu

rkm

enist

an

Resource Governance Index Score (100 is best 0 is worst)

PROCESSNatural resources are critical as they are inputs to almost every physical product manufactured. SOEs across countrieshave around 80% share in production of natural resources*. It is important to have transparency in resource managementas extraction of natural resources is one of the most politically, socially and economically complex undertakings. It isgratifying that India scores a high value in the Resource Governance Index

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. Note: Resource governance index is based on 3 components i.e. value realisation, revenue management and enabling environment. * represents oil and natural gas production

PSU Awards 2019

Share of SOEs procuring from MSMEs

67%

41%

33%

59%

FY16 FY18

<=20% Above 20%

No o

f com

pani

es =

129

No o

f com

pani

es =

164

PROCUREMENT

A strong MSME eco-system would be critical to achieve a US$ 5 tn economy. SOEs have been helping in strengtheningthe capabilities of MSMEs through backward and forward linkages, collaboration and competition. Around 60% of SOEswho 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

Source: Department Of Public Enterprises

PSU Awards 2019

PREPAREThe adaptability of the 4th industrial revolution will depend on all stakeholders, including the government. India’s improvement in rank of 21 in 2018 from 26 in 2017 among 135 countries in the parameter ‘Future Orientation of the Government’ indicates a supportive environment

Source: World Bank, Global Competitiveness Index

0

10

20

30

40

50

60

70

80

90

Sing

apor

eUn

ited

Stat

esSa

udi A

rabi

aOm

anM

alay

siaFi

nlan

dGe

rman

yNe

w Z

eala

ndSw

eden

Denm

ark

Indi

aM

alta

Unite

d Ki

ngdo

mTa

jikist

anCa

nada

Icel

and

Seyc

helle

sAu

stra

liaGa

mbi

a, T

heKa

zakh

stan

Ghan

aSe

nega

lTa

nzan

iaFr

ance

Kore

a, R

ep.

Jord

anPa

kist

anCh

ileEg

ypt

Ugan

daAr

men

iaGe

orgi

aCô

te d

'Ivoi

reTa

iwan

, Chi

naBu

rkin

a Fa

soBa

ngla

desh

Urug

uay

Viet

Nam

Phili

ppin

esBe

nin

Serb

iaAr

gent

ina

Slov

enia

Cam

bodi

aSp

ain

Liber

iaRo

man

iaM

ali

Iran,

Isla

mic

Rep.

Dom

inica

n Re

publ

icCz

ech

Repu

blic

Colo

mbi

aKy

rgyz

Rep

ublic

Mal

awi

Peru

Latv

iaPa

ragu

ayUk

rain

eM

ozam

biqu

eTr

inid

ad a

nd T

obag

oNi

geria

Guat

emal

aIta

lyCo

ngo,

Dem

ocra

tic R

ep.

Braz

ilHa

itiCr

oatia

Mau

ritan

iaEl

Sal

vado

rVe

nezu

ela

Scor

e

Future orientation of the government score (100 is best 0 is worst)

PSU Awards 2019

SUMMARY