The sale of public sector units is on and almost all such companies are being put under the hammer by the present government. The market too is going ballistic over PSU shares, whose prices are touching new highs.

The list of companies to be sold includes Shipping Corporation of India, Concor, oil companies and even NMDC. Insiders say both Vedanta and the Birlas are eyeing NMDC. As far as Concor is concerned, the Adani group is a strong contender.

As far as banks are concerned, the union minister of finance for state is reported to have said that who will buy weak and loss making banks that is why we have selected four well known banks. But some analysts point out that the share prices of these PSB seem cheap, should one be tempted to buy them? The answer is no, cautions an analyst. He explain that a share can actually be called ‘cheap’ when its prices are down but the net-worth of the company is still intact or the company has a good future earning potential. Many PSBs currently fail on both these counts. The actual net worth of many smaller PSBs is in serious doubt. Not only the share prices but the net worth of many PSBs is sliding fast. Sliding net worth, coupled with the poor credit growth scenario, limits the future earning potential of almost all PSBs. The speed with which banking frauds are coming out, “many PSBs might have reached zero or negative net worth (bankrupt) by now”, says a Delhi-based auditor, who believes that banks like PNB or BOB would have been picked up immediately.

The industry groups who may be interested in PSU banks include Tatas, Birlas and Piramals “if the RBI clears corporate takeovers of banks. Air India’s sale to the Tata group is almost a done deal and so is the sale of BPCL to Vedanta, which has set up a $10 billion fund to bid for the company.