The bottomlines of seven of the eight companies in which the government divested its stake through strategic sale have improved remarkably.
The latest financial results of these companies show that profitability has shot up by as much as 110 per cent in some cases.
Barring Videsh Sanchar Nigam Ltd, whose profits dipped, Modern Food, Balco, CMC, Paradeep Phosphates, Hindustan Zinc, Indian Petro Chemicals Ltd and Hindustan Teleprinters Ltd have all reported improved performance after divestment.
While Modern Food and Paradeep Phosphates, which were incurring losses prior to divestment, have reduced losses substantially and are poised to make profits in 2003-04. The net profits of CMC, Hindustan Zinc and IPCL have jumped between 48 per cent and 110 per cent.
HTL was a peculiar case. In 2000-01, when it was under government control, the company reported a net profit of Rs 2 crore (Rs 20 million).
Much to the chagrin of Hindustan Futuristic Communications Ltd, which bought HTL, the company had statutory liabilities of Rs 50 crore (Rs 500 million).
Even as the government is sitting over HFCL's post-closure adjustment claim for this amount, HTL continues to be in the red.
The new management has, however, reduced the company's losses from Rs 100 crore (Rs 1 billion) in 2001-02 to Rs 20 crore (Rs 200 million) in 2002-03.
HFCL Chairman Mahendra Nahata says: "We are suffering as the entity from which we bought HTL also happens to be its buyer. We, therefore, cannot afford to be too forceful with our post-disclosure claim of Rs 50 crore."
With the government throwing open the international long-distance business to private players in April 2002, VSNL lost its monopoly the year it was privatised. The Tatas acquired 25 per cent in VSNL on February 5, 2002.
Competition in the international long-distance segment, VSNL's mainstay, saw its profitability dip nearly 45 per cent in the first year of privatisation.
Balco, which was the second company to be sold after Modern Food, was acquired by Sterlite Industries on March 2, 2001. It, however, bore the brunt of 13 trade unions, which opposed its privatisation.
A 67-day strike resulted in the company posting 95 per cent lower profits of Rs 2.01 crore (Rs 20.1 million) in the first year following privatisation.
It, however, bounced back with a Rs 60 crore (Rs 600 million) profit-before-tax in the second year, 2002-03.
The sale of the government's 74 per cent stake in Modern Food to Hindustan Lever in January 2000 set the ball rolling for strategic sale of PSUs.
Modern Food's losses in 1999-2000 stood at Rs 48.23 crore (Rs 482.3 million), including Rs 35.19 crore (Rs 351.9 million) towards provisions made for previous years.
Its finances have been shoring up since then, with the company registering an operating profit before interest and restructuring expenses of Rs 4.8 crore (Rs 48 million) in 2002, against a loss of Rs 8.5 crore (Rs 85 million) in 2001.
A Modern Food spokesperson says changes have been initiated in virtually every chain of the production process.
For example, before privatisation, the cost of converting flour to bread was 50 per cent higher than its competitors.
In some locations it was as high as 100 per cent. This has now been brought down substantially.
Tata Sons Ltd acquired 51 per cent in CMC Ltd on October 5, 2001. While CMC was a money-spinner even as a public-sector unit, net profit soared from Rs 25.09 crore (Rs 250.9 million) in 2000-01 to Rs 33.64 crore (Rs 336.4 million) in the next financial year. It increased 10 per cent to Rs 37.05 crore (Rs 370.5 million) in 2002-03.
Turnaround in Paradeep Phosphates has been extraordinary. The Zuari-Maroc combine acquired a 74 per cent stake in the company on February 28, 2002.
Though the government invested over Rs 600 crore (Rs 6 billion) in Paradeep Phosphates, it never made profits since inception in 1983. Losses in 2001-02 were Rs 230 crore, (Rs 2.30 billion) while its net worth was negative.
Under the private management, losses were reduced to Rs 68.71 crore (Rs 687.1 million). Sales trebled from 250,000 tonnes in 2001-02 to 750,000 tonnes in 2002-03.
Paradeep Phosphates officials say the plants worked at 40 per cent of their capacity prior to the strategic sale. Now the same plants are working at full capacity.
Hindustan Zinc Ltd, in which Sterlite acquired a 26 per cent stake on April 11, 2002, also improved its net profits by 109 per cent to Rs 142.15 crore (Rs 1.42 billion) a year after it was privatised.
After Reliance's acquisition of 26 per cent in IPCL on May 17, 2002, the company's profits soared 90 per cent to Rs 204 crore (Rs 2.04 billion) in 2002-03.