Slow transformation from Govt to Private
One thing needs to be understood is that Govt has no business to be in business. That's what Mr Modi also says.
Govt run companies ( PSUs) etc can never be efficient. Beaurecrats can seldom be good businessmen. Their tenures are short, interference by the Govt, vested interests etc never allow them to focus on profits, growth etc.
See what happened to the Aviation sector after privatisation. Air India almost died. Same story with Telecom. Same is happening with Banks now.
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Next is going to be insurance sector. Slow transformation of business is happening from Insurance PSUs to HDFC life, ICICI prudential, Bajaj Allianz and there are 20+ private insurance companies now.
PSUs are to be considered as Govt Departments only. Govt runs them the way they want. Profits are secondary. See the price cap on petrol / diesel being done after dismantling the price control and linking it to open market prices.BPCL, Indian Oil, HPCL were bleeding for few quarters and were bailed out with some Govt subsidy.
So, it is always better to stay away from PSUs.
Yes, there are many select PSUs which you can invest. For Example, HAL- there is no competition, Mining sector - NMDC etc where it is a monopoly still, SBI- this Bank has Sovereign gaurantee. But you have to be very very selective while investing in PSUs.
Don't calculate the dividend yield of PSUs. If the price itself is lower by 50% after 5 years, what is the use of Dividend yield. You can try doing research on Coal India and see what I am saying.
Select good private companies with huge potential for growth, management with integrity, having profits, small in size at present and enjoy the returns.
Happy investing.
