FIs buy low-float PSUs on disinvestment hope

INSTITUTIONAL investors seem to be finding long term value in stateowned Indian companies. Portfolio investors have hiked their stakes in public sector undertakings (PSUs) during the first quarter of FY10, signalling interest in a stock segment that is otherwise perceived to be slowmoving and red tape-bound compared with their private sector peers. 
Institutional investors are increasing their stake in low-float PSU banks, infrastructure companies, capital goods manufacturers and gas transportation companies on expectations of a rerating and increased shareholder value in the event of government deciding to divest stake. 
Institutional investors are showing interest in select state-owned companies. PSU banks, for instance, are a big draw among institutional investors because of their improved net interest income (NII) margins, said Gopal Agarwal, equities head, Mirae Asset Investment. 
Stable government and the willingness to divest stake in closely-held PSUs are the prime reasons for the general build-up of interest on PSU stocks, Mr Agarwal added. 
Shareholding pattern (April-June quarter) of PSU companies reveal that FIIs have been big buyers in PSU banks. FII holdings in Central Bank, Vijaya Bank, Union Bank, IDBI Bank, Indian Overseas Bank, SBI and term lenders IFCI and IDFC have gone up significantly during the quarter. Shipping Corporation, Power Finance Corporation and HPCL are amongst government companies where FII have marginally reduced (between 0.2 and 1.4%) their exposure . On the other hand, mutual funds are loading their portfolios with companies Power Trading Corporation , BPCL and HPCL, along with select (few) banking stocks like Canara Bank, IFCI and Allahabad Bank. Contrary to FIIs, mutual funds have sold holdings in Bank Of Baroda , Indian Overseas Bank, Union Bank, IDFC and PNB. 
Banks and insurance firms have followed a strategy similar to that of FIIs and have consolidated their positions in banking companies, while reducing exposure to engineering and utility companies. 
shailesh.menon@timesgroup .com