WHY NOT AN IPO FROM INDIAN POST?

By Ruma Dubey

When was the last time you actually went to the neighborhood post office?  Or rather, have you written a letter (not email) and actually ‘posted’ it as in sealed it in an envelope, wrote the address, stuck a stamp and actually put it in the red mail box?  With Diwali round the corner, you might actually now see more of your postman but otherwise, one wonders if the postman has enough letters to deliver?

Yes, that is how Indian Post has become now; there but not really there. We, living in the metros might have nothing to do with the Indian postal services at all but surely in rural India and smaller towns, post offices still hold sway.  And it is only when we read about how developed countries, not only have post offices but are ‘booming’ to say the least.

Take the case of Japan. It is extremely successful, not delivering mails but mainly as banks. Most post offices in Japan offer a savings account and it does cover most banking needs including ATMs at a wide range of places including remote villages and mountain towns. Japan Post secures 28% of Japan's household savings and is widely billed as the world's largest bank. It has net assets of roughly 11 trillion yen. And it has drafted a plan to go public, in Oct 2015, expecting to raise $87 billion from two-thirds of its shares to finance reconstruction from the March 2011 disaster. Presently, it remains a Govt unit and once this IPO happens, Govt stake will come down to just one third. Japan Post Bank Co. last month applied to begin selling mortgages next April in a bid to diversify its assets from government bonds before the IPO. Banks have opposed this move, saying the playing field isn't level!

And then there is Royal Mail of Britain, which is also planning on an IPO, but as early as 2013. Analysts think Royal Mail could be worth up to £3bn-£4bn and would be the most ambitious privatization move after the railways. Like the rest of the world, its letters and parcels delivery business continues to make losses but its parcels unit is the money winner.

So that brings forth the thought – why can’t our Indian postal services be made more efficient and eventually an IPO?  Yes, delivering letters in this era of social network, emails and couriers is a losing business but like Japan, maybe becoming a bank? Why can’t RBI grant a banking license to India Post? This idea has been around for ages yet it does not seem to take off. The Indian post, in terms of its reach is formidable - there are 1.55 lakh post offices in the country, of which 1.39 lakh are in rural areas. It has 75,000 branches which is more than all scheduled commercial banks put together. The various savings schemes operated by post office across India have outstanding balances of some Rs 600,000 crore. 

India Post is already doing many activities of a bank and giving it that stature will not only help it over its losses but might also give a new meaning to micro financing.  As per a report in the Hindu, this decision to include India Post has already been proven in the context of implementation of the Mahatma Gandhi National Rural Employment Guarantee Scheme, where 46.7 million accounts had been opened and wages amounting to over Rs 18,000 crore had been distributed as on October 31 last year. It is also proving useful as the nodal agency for distribution of UIDAI cards.

The only bee in this bonnet could be the lack of adequate staff who would be capable enough to handle banking activities. But then again, it is a huge employment opportunity and if given the right training and if proper infrastructure is put in place, it could become as a big a revolution as the mobile phones in India.

India Post becoming a bank could mean it could become larger than SBI, at least in terms of reach. And if nurtured well, it could indeed become humungous. Once it turns around, it could even think of divesting stake!

Yes, India Post could become a mulch cow from the current emancipated bone dry cattle it is. The potential is very much there but like all things in India, it only needs to be implemented right. This can become a great “political” move which the UPA can ride on. Will it have the sense to cash-in or will it just bleed the country and the other profit making PSU organisations to death?