Railway Vikas Nigam Limited has been adorned with the prestigious Navratna status. What does it mean for the company?
Railway Vikas Nigam Limited (RVNL), a government undertaking, plays a vital role in developing and modernising Indian Railways. It’s business performance, financial results, and projects have garnered attention. Recently, RVNL was granted Navratna status, which holds great significance.
Navratna companies are select Indian public sector enterprises recognised for their exceptional performance.
Let’s explore what Navratna companies are. What are its benefits? What does this mean for RVNL?
What’s Happening?
In May 2023, the Ministry of Railways announced that RVNL had been granted the prestigious Navratna status.
RVNL is a public-sector railway company that has recently attracted investors’ attention due to solid orders and a remarkable surge in its stock price.
On 26th May, RVNL released its financial results for the fourth quarter of the fiscal year 2023. As reported by Business Standard, the company’s consolidated net profit for the March quarter declined by 5% to Rs 359.3 crore compared to Rs 378 crore during the same period last year.
While market fluctuations are common, we will focus on Navratna Central Public Sector Enterprises (CPSEs) today. The Navratna status was initially introduced by the Government of India in 1997 and was granted to nine public sector companies. Over time, additional companies have been included in this exclusive group based on their performance and fulfilment of specific criteria.
With RVNL’s inclusion, the number of Navratna companies has reached 13.
Navratna status is granted to a company in India based on specific criteria. To be eligible for Navratna status, a company must first obtain Miniratna status. It should have a minimum of four independent directors, and its composite score must be 60 or higher out of 100.
It is essential to understand that Maharatna, Navratna, and Miniratna are classifications for government undertakings in India.
Maharatna companies are those that have achieved remarkable financial and commercial significance. Navratna companies, while prestigious, have comparatively less financial autonomy than Maharatna companies.
The grant of Navratna status brings several advantages to the recipient company. Firstly, Navratna companies are authorised to make investments of up to Rs 1,000 crore without requiring the central government’s approval.
Furthermore, they can allocate up to 15% of their net worth towards a single project. Additionally, Navratna companies have the flexibility to invest 30% of their net worth, capped at Rs 1,000 crore, over the course of the year.
These benefits give Navratna companies greater financial autonomy and flexibility to undertake ambitious projects and make strategic investments.
What’s Next?
Following the conferment of Navratna status, the board of RVNL will gain enhanced power and freedom to operate. According to Business Standard, this increased autonomy is expected to accelerate the company’s growth, allowing it to expand its horizons beyond the railway sector and also step into international projects. This can open doors to new opportunities for the company.
Meanwhile, the board of RVNL has put forth a dividend proposal of Rs 0.36 per share for the financial year 2023. However, the final approval from the shareholders is still pending.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The company mentioned in the article is for information only. This is not investment advice.
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