PSUs are running amok with grand ventures

livemint.com:

Coal India Ltd plans to mine for lithium. The company’s technical director, B. Veera Reddy, said last week the company plans to explore for the critical mineral.

CIL has so far only been in the business of mining coal.  Recently, Indian Oil Corporation Ltd and NTPC Ltd announced a joint venture to produce green hydrogen. In defence, Hindustan Aeronautics Ltd is reaping the benefits of a long order book that reflects government priorities, instead of what the company is good at. In the maritime sector, Cochin Shipyards Ltd is staking a claim to build zero emission feeder container vessels without any visibility as to how it will do that.

The striking aspect of these decisions is that these public sector undertakings, or PSUs, are making such announcements that are market moving without explaining to their private sector shareholders whether they have the technical capability to execute these new projects. Most of them have the money to spend, of course, being largely debt-free entities. Yet, the only shareholder that seem to know of and possibly approve these plans is the government of India, which holds majority stakes in these companies. That is the antithesis of good corporate governance, especially for companies run overwhelmingly on public funds.  A private sector company will face serious shareholder blowback if it tries these capers.

There have to be approvals explained in the annual general meetings, whose decisions are parsed carefully by investment research firms. There is a remarkable lack of such audits at state-owned firms. The lack of such controls is possibly why these companies jump to take up large projects whenever the government comes up with a new policy idea.  For instance, in the successive Open