New Delhi, Dec 24 (Inditop.com) India Thursday created a new category for its highly-efficient state-run firms, called maharatnas or mega-jewels, to extend much greater autonomy to its managements and flexibility in areas like mergers, acquisitions and recruitment.
“The main objective of the maharatna scheme is to empower the mega central public sector enterprises to expand their operations and emerge as global giants,” said an official statement after the proposal was cleared by a meeting of the cabinet.
“The proposed higher category will act as an incentive for other navratnas (jewels) firms, provide brand value and facilitate the delegation of enhanced powers to central public sector enterprises,” the statement added.
Currently, there are 18 navratnas among state-run firms.
For a company to be accorded maharatna status, it would first have to be a navratna, besides being listed on stock exchanges with public shareholding as prescribed by the Securities and Exchange Board of India (SEBI).
The firm should also have clocked an average annual turnover of Rs.25,000 crore ($5 billion) with an average annual net worth of Rs.15,000 crore ($3 billion) during the past three years.
It should also have posted annual net profit of more than Rs.5,000 crore ($1 billion) during the past three years and enjoy a significant global presence or international operations.
“The procedure for grant of maharatna status as well as their review is proposed to be similar to that in vogue for the grant of navratna status,” said the statement, adding the introduction of the scheme will not involve any additional expenditure.
Some of the special powers to maharatna companies include:
– Make equity investment to establish joint ventures and subsidiaries in India or abroad
– Execute mergers in India or abroad subject to a ceiling of 15 percent of its net worth up to an absolute ceiling of Rs.5,000 crore ($1 billion)
– Powers to the board on recruitment.
The government had introduced the navratna scheme in 1997 to identify state-run firms that had comparative advantages over others and needed autonomy and support to become global giants.
The boards of these navratna companies have been delegated powers in areas such as capital expenditure, investment in joint ventures or subsidiaries, mergers and human resources management.
“The current criteria for the grant of navratna status are size-neutral. Over the years some navratna companies have grown very big and have considerably larger operation than their peers,” said the statement.
“The proposed higher category (of maharatna) will act as an incentive for other navratna companies, provide brand value and facilitate delegation of enhanced powers to central public sector undertakings.”
