Financial Performance of Privatized Indian Public Sector

KISHOR CHANDRA MEHER

Abstract


Financial Performance of Privatized Indian Public Sector

Dr.Kishor Chandra Meher

Professor (Accounting & finance), Dept. of Accounting & Finance

College of Business and Economics, DebreBerhan University, Ethiopia

Email: kishorcm@gmail.com

Mob. No: +251-946704116

 

ABSTRACT

The paper attempts to identify the relevance of the privatization process of the Indian economy and its transition from state controlled to liberalized market economy. It starts with initial objectives of disinvestment in Indian economy at the advent of globalization since 1991-92, to bridge up the gap of rising fiscal deficit. Thereafter, strategic sale of PSE’s have been resorted to where the impact of change in ownership due to strategic sale has been studied. The methodologies adopted for the study are t test to know the significance of mean difference of various financial ratios between pre and post privatization years. In order to assess the impact of financial performance of the divested company where there is transfer of ownership and control, the contribution of loan funds in the investment of fixed assets and working capital is being studied by applying multiple regression models. With regard to level of significance of financial performance, the t test in case of Paradeep Phosphate Ltd (PPL) reveals significant improvement in short term financial position of the divested companies. The t test in case of group of divested companies reveals the significant improvement in the operational efficiency. The multiple regression analysis reveals that the fixed asset is not influenced by the share capital where as the net current asset is highly influenced by the loan fund .The paper concludes that the change in ownership has brought more liquidity through unsecured loan leading to better financial leverage by proper working capital management that brings maximum value addition to the shareholders in post privatization years.

Key Words: Gross domestic product, Government of India (GOI), Public sector enterprise (PSE), Fiscal deficit, financial leverage, financial ratios, Disinvestment, Strategic Sale.


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