Manish Sinha Managing Director Dun & Bradstreet India August - - PowerPoint PPT Presentation

PSU Awards 2019

Manish Sinha

Managing Director Dun & Bradstreet India

August 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 Enterprise value per employee US$ million Australia Austria Brazil Canada China Denmark Finland France Germany Greece Iceland India Italy Japan Korea Netherlands New Zealand Poland Spain Switzerland Turkey United Kingdom United States 0.0 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 6.0

Enterprise 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 Enterprises 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

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

Source: Department Of Public Enterprises

• No. of SOEs - 339

% share of SOEs % share of each SOE in T

• tal 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 2.65 India Other sectors SOEs

FY18 (US$ tn) FY25 (US$ tn) Growth (in times)

0.12 0.50 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

Source: RBI, MOSPI, Department Of Public Enterprises Note: 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 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

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 % companies featured in Top 500 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 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

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

65 64 61 51

Multinationals Institutionally owned and widely Held Family Owned Government owned

PSU Awards 2019

Good Satisfactory Weak Poor Failing

Transparency in resource management

10 20 30 40 50 60 70 80 90 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

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

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

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 of companies = 129 No of companies = 164

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

Source: Department Of Public Enterprises

PSU Awards 2019

PREPARE The 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

10 20 30 40 50 60 70 80 90

Singapore United States 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 Haiti Croatia Mauritania El Salvador Venezuela

Score

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

PSU Awards 2019

SUMMARY