manish sinha · manish sinha managing director dun & bradstreet india august 2019. role of...
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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
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lom
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Indi
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Trin
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Mal
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Cote
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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
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Scor
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Future orientation of the government score (100 is best 0 is worst)
PSU Awards 2019
SUMMARY