Best PSU Stocks in India (2024)

Last Updated on Oct 18, 2024 by Anjali Chourasiya

Public Sector Undertakings (PSUs) play a crucial role in India’s economic landscape. These government-owned companies, whether fully or partially, operate in key industries such as energy, infrastructure, and finance, ensuring the delivery of essential services to the public. With a government stake of at least 51%, PSUs are known for their stability and long-term investment potential. Investing in PSU stocks offers exposure to these critical sectors, often providing reliable dividend income and less market volatility compared to private-sector stocks. In this article, we will explore the various aspects of PSU stocks, their features, benefits, risks, and how they differ from regular stocks.

Top Listed PSU Stocks in India – Updated 2024

Name	Sub-Sector	Market Cap (Rs. in cr.)	Close Price (Rs.)	PE Ratio	5Y CAGR (%)	Debt to Equity (%)
Rail Vikas Nigam Ltd	Specialized Finance	102,082.58	489.60	64.84	83.63	0.69
Hindustan Aeronautics Ltd	Aerospace & Defense Equipments	302,192.67	4,518.60	39.65	66.33	0.00
Garden Reach Shipbuilders & Engineers Ltd	Shipbuilding	19,985.89	1,744.70	55.94	59.51	0.04
Hindustan Copper Ltd	Mining – Copper	30,674.00	317.20	103.87	57.92	0.10
Cochin Shipyard Ltd	Shipbuilding	41,039.29	1,559.95	52.39	56.71	0.10
Bharat Dynamics Ltd	Aerospace & Defense Equipments	42,242.66	1,152.40	68.94	52.40	0.00
Bharat Electronics Ltd	Electronic Equipments	207,999.76	284.55	52.20	49.78	0.00
shipping corporation of India Ltd	Logistics	11,160.54	239.60	16.44	48.41	0.39
MSTC Ltd	Commodities Trading	4,993.12	709.25	24.43	48.20	0.16
Housing and Urban Development Corporation Ltd	Specialized Finance	43,465.25	217.12	20.53	45.54	4.45

Note: The data in the list of the best 10 PSU stocks in India is taken from the Tickertape Stock Screener on 17th October 2024. It is based on the following filters:

• 5Y CAGR: Sorted from highest to lowest
• Debt to Equity: Set to Low

🚀 Pro Tip: Use Tickertape’s Portfolio Analysis to assess your investment portfolio’s diversification and performance.

Confused About Which PSU Stock to Invest in? Explore these PSU smallcases

• PSU Banks for SIP: This smallcase managed by Stoxbazar has a basket of PSU banks that are trading below their fair value.

PSU BANKS FOR SIP smallcase by StoxBazar

• Quantace PSU Stars: This smallcase managed by Quantace Research is a concentrated basket of 3-15 stocks selected from NSE Listed Universe where the direct holding of the Central Government, State Government or of other CPSEs is 51% or more, excluding PSU Banks.

Quantace PSU Stars smallcase by Quantace Research

• Disclosures for PSU Banks for SIP smallcase
• Disclosures for Quantace PSU Stars smallcase

What is PSU?

PSU full form stands for Public Sector Undertaking. A PSU is a government-owned corporation or company in which the central or state government holds a majority stake of 51% or more. These companies operate across various industries in India, such as energy, infrastructure, banking, and manufacturing. The key objective of a PSU in India is to undertake commercial activities while contributing to economic development. Prominent examples of PSUs include Indian Oil Corporation, Bharat Petroleum, and Coal India.

PSUs in India are categorised into three types based on their financial strength and market presence: Maharatna, Navratna, and Miniratna. The government categorises these PSUs to determine their level of autonomy and decision-making power. The Maharatna company list includes some of the largest and most profitable government-owned enterprises, while Navratnas and Miniratnas operate on a smaller scale.

Overview of the Top PSU Stocks to Invest in India

Rail Vikas Nigam Ltd

Rail Vikas Nigam Ltd (RVNL) was incorporated in 2003 as a public sector enterprise under the Ministry of Railways, Government of India. The company is primarily engaged in implementing railway infrastructure projects, including the construction of new lines, gauge conversion, and railway electrification.

As of 17th October 2024, the company has a market capitalisation of Rs. 102,082.58 cr., with a close price of Rs. 489.60. Its price-to-earnings (PE) ratio is 64.84. RVNL has demonstrated a 5-year compound annual growth rate (CAGR) of 83.63%. The company’s debt-to-equity ratio is 0.69%.

Hindustan Aeronautics Ltd

Hindustan Aeronautics Ltd (HAL) was founded in 1940 and is a major player in India’s aerospace and defence sector. The company is engaged in the design, development, and production of aircraft, helicopters, and related systems for defence and civil aviation.

As of 17th October 2024, HAL has a market capitalisation of Rs. 302,192.67 cr., with a close price of Rs. 4,518.60. The price-to-earnings (PE) ratio is 39.65. HAL’s 5-year compound annual growth rate (CAGR) is 66.33%, and the company maintains a debt-to-equity ratio of 0.00%.

Garden Reach Shipbuilders & Engineers Ltd

Founded in 1884, Garden Reach Shipbuilders & Engineers Ltd (GRSE) is one of India’s leading shipbuilding companies. It specialises in the construction of warships and other vessels for the Indian Navy and Coast Guard.

As of 17th October 2024, GRSE has a market capitalisation of Rs. 19,985.89 cr. The close price is Rs. 1,744.70, and the price-to-earnings (PE) ratio is 55.94. GRSE’s 5-year compound annual growth rate (CAGR) is 59.51%, and its debt-to-equity ratio is 0.04%.

Hindustan Copper Ltd

Hindustan Copper Ltd was established in 1967 and operates under the Ministry of Mines. The company is involved in the exploration, mining, and production of copper and copper products in India.

As of 17th October 2024, Hindustan Copper Ltd has a market capitalisation of Rs. 30,674.00 cr., with a close price of Rs. 317.20. The price-to-earnings (PE) ratio is 103.87, and its 5-year compound annual growth rate (CAGR) is 57.92%. The company’s debt-to-equity ratio is 0.10%.

Cochin Shipyard Ltd

Cochin Shipyard Ltd was incorporated in 1972 and is one of the largest shipbuilding and maintenance facilities in India. The company primarily builds ships for the Indian Navy and Coast Guard and also undertakes ship repair.

As of 17th October 2024, Cochin Shipyard Ltd has a market capitalisation of Rs. 41,039.29 cr., with a close price of Rs. 1,559.95. The price-to-earnings (PE) ratio is 52.39, and the company’s 5-year compound annual growth rate (CAGR) is 56.71%. The debt-to-equity ratio is 0.10%.

Bharat Dynamics Ltd

Bharat Dynamics Ltd was established in 1970 and is a key manufacturer of defence equipment, specialising in missile systems and other strategic defence products for the Indian Armed Forces.

As of 17th October 2024, Bharat Dynamics Ltd has a market capitalisation of Rs. 42,242.66 cr., with a close price of Rs. 1,152.40. The price-to-earnings (PE) ratio is 68.94. The company’s 5-year compound annual growth rate (CAGR) is 52.40%, and its debt-to-equity ratio is 0.00%.

Bharat Electronics Ltd

Bharat Electronics Ltd (BEL) was founded in 1954 and is involved in the design, development, and manufacture of advanced electronic equipment, mainly for the defence and aerospace sectors in India.

As of 17th October 2024, Bharat Electronics Ltd has a market capitalisation of Rs. 207,999.76 cr., with a close price of Rs. 284.55. The price-to-earnings (PE) ratio is 52.20. BEL’s 5-year compound annual growth rate (CAGR) is 49.78%, and the company maintains a debt-to-equity ratio of 0.00%.

Shipping Corporation of India Ltd

Founded in 1961, Shipping Corporation of India Ltd (SCI) is a public sector enterprise involved in shipping and logistics, offering transportation services for liquid, dry bulk, and container cargo.

As of 17th October 2024, Shipping Corporation of India Ltd has a market capitalisation of Rs. 11,160.54 cr., with a close price of Rs. 239.60. The price-to-earnings (PE) ratio is 16.44, and its 5-year compound annual growth rate (CAGR) is 48.41%. The debt-to-equity ratio is 0.39%.

MSTC Ltd

MSTC Ltd was established in 1964 and is engaged in commodities trading, specialising in e-auctions, recycling, and providing e-commerce services for industrial goods and machinery.

As of 17th October 2024, MSTC Ltd has a market capitalisation of Rs. 4,993.12 cr., with a close price of Rs. 709.25. The price-to-earnings (PE) ratio is 24.43. The company’s 5-year compound annual growth rate (CAGR) is 48.20%, and its debt-to-equity ratio is 0.16%.

Housing and Urban Development Corporation Ltd

Housing and Urban Development Corporation Ltd (HUDCO) was established in 1970 and is a public sector financial institution providing loans for housing and urban infrastructure projects.

As of 17th October 2024, HUDCO has a market capitalisation of Rs. 43,465.25 cr., with a close price of Rs. 217.12. The price-to-earnings (PE) ratio is 20.53, and its 5-year compound annual growth rate (CAGR) is 45.54%. The company’s debt-to-equity ratio is 4.45%.

Features of PSU Stocks

When you invest in PSU stocks, you are essentially purchasing shares of companies that the government partially or fully owns. These stocks come with certain features that differentiate them from private-sector stocks:

1. Government Ownership: In a PSU, the government holds a significant portion of the company’s shares, often ensuring stability and long-term viability.
2. Stable Dividend Payouts: Many PSU stocks tend to offer consistent dividend payouts as a result of their steady cash flows and government backing. These payouts can provide regular income to investors.
3. Lower Volatility: PSU stocks in sectors like energy and utilities may show lower volatility compared to some private-sector companies due to their essential services and government control.
4. Public Sector Involvement: Many PSUs operate in key industries that are crucial to national development. This public sector involvement can make these companies less susceptible to market disruptions.
5. Strong Asset Base: Most PSU companies have a strong asset base and access to natural resources, which contributes to their long-term profitability.

PSU Vs Regular Stocks

One question that often arises is: “How are PSU stocks different from regular stocks?” The primary distinction lies in the ownership and control of the companies. Here’s a comparison between PSU stocks and regular (private sector) stocks:

Feature	PSU Stocks (Public Sector Undertakings)	Regular Stocks (Private Sector)
Ownership	The government holds a majority stake	Private individuals or entities
Dividend Payouts	Generally higher and more stable	Varies based on company policy
Volatility	Relatively lower	Can be high depending on sector
Government Involvement	High government intervention	Minimal to no government involvement
Risk	Generally lower risk	Varies; could be high-risk high-reward

Why Invest in PSU Stocks?

People often wonder, “Why should you invest in PSU stocks?” There are several reasons why investors consider PSUs to be a solid choice, especially in the context of long-term, low-risk investments.

1. Stable Dividends: PSU stocks often provide higher dividends, making them attractive to investors seeking regular income. Many public sector undertakings have well-established businesses with consistent cash flows, allowing for reliable payouts.
2. Lower Volatility: Given the government’s majority control and intervention, PSU stocks may offer more stability during economic downturns. The essential services provided by PSUs in India, such as utilities, oil and gas, can also shield them from drastic market fluctuations.
3. National Importance: PSUs operate in strategic sectors such as defence, energy, and infrastructure. These sectors are critical for the economy, so the likelihood of failure is relatively low.
4. Valuation: Some PSU stocks may be available at lower valuations compared to their private counterparts, offering investors a good value for money.
5. Long-Term Growth: Although PSU stocks might not provide exponential growth in the short term, they may offer steady, long-term appreciation as the government continues to develop sectors like energy, banking, and infrastructure.

Types of PSU companies

Central Public-Sector Enterprises (CPSE)

These companies are where the central government holds a stake of more than 15%. Such companies are further classified into strategic CPSEs and non-strategic CPSEs. Companies engaged in strategic sectors like defence (arms and ammunition, military aircraft, military hardware, and other related commodities), railways, atomic energy, and others are strategic CPSEs.

Types of CPSEs

Based on their financial autonomy, CPSEs are further classified into three types:

1. Maharatna stocks

There are 11 Maharatna companies in India. In the past, these entities have been Navratna companies. Maharatna companies enjoy the greatest financial and authoritative autonomy of the lot. They don’t have to seek the government’s approval for every decision. This reduces their dependency and hastens the decision-making process. It also aids their growth and helps them compete at a global level.

Maharatna companies enjoy the liberty of choosing their investments; they can invest 15% of their net worth. Since these companies operate on a larger scale, they have an investment ceiling of Rs. 5,000 cr.

2. Navratna stocks

Navratna companies have more operational flexibility and freedom compared to Miniratna companies. These companies will have enjoyed the status of a Miniratna company having four independent board members. This status gives companies complete autonomy.

Although Navratna companies can invest without the government’s approval, there are certain restrictions on the amount that can be invested. Such companies can invest up to Rs. 1,000 cr., or 15% of their net worth on a single project, or 30% of their net worth in the entire year, whichever is less. Together, these benefits have given Navratna companies financial freedom and have increased their efficiency and growth prospects.

3. Miniratna stocks

There are 78 Miniratna companies in India. These companies are further divided into two categories – categories I and II. Miniratna status is given to companies that improve efficiency and competitiveness. Such companies are free to use funds based on predetermined limits. Miniratna category I companies can invest up to Rs. 500 cr. or a sum equal to their net worth, whichever is less.

On the other hand, Miniratna category II companies can invest Rs. 300 cr. or 50% of their net worth, whichever is lower. They don’t require prior approval from the government to make investments. This has opened up many opportunities for organisations, making way for expansion.

State-Level Public Entities (SLPE)

State-Level Public Entities (SLPE) are companies in which a state government or another state-owned SLPE holds more than 51% of the ownership stake. These entities are similar to central PSUs but are managed and controlled by individual state governments. SLPEs typically operate within sectors critical to state-level infrastructure, utilities, and services such as transportation, power generation, and local industries. Their primary goal is to contribute to the state’s economic development while fulfilling public service obligations.

Public-Sector Banks (PSB)

Public-Sector Banks (PSB) are financial institutions where the central government or another public-sector bank holds more than 51% of the voting shares. These banks play a significant role in India’s financial system, providing services like loans, savings accounts, and deposits while supporting government initiatives like financial inclusion. The Nifty PSU Bank Index tracks the performance of major PSBs, giving investors a snapshot of the overall health of this sector. Banks like the State Bank of India (SBI) and Punjab National Bank (PNB) are prominent PSBs.

Joint Ventures (JVs)

Joint Ventures (JVs) are business arrangements where two or more parties come together to undertake a specific project or business activity, with each party contributing resources like capital or expertise. In the case of public-sector JVs, the government partners with private companies or other public entities to form a joint venture, typically to achieve large-scale projects. These ventures help pool resources, manage risks, and leverage the strengths of both the public and private sectors for mutual benefit.

How to Invest in PSU Stocks?

If you are wondering how to invest in PSU stocks, you can follow these simple steps:

1. Stock Market: PSU stocks are listed on the major stock exchanges in India, such as NSE and BSE. You can invest in them via any investing platform.
2. Mutual Funds: Several mutual funds focus on public sector undertakings, which allow investors to gain exposure to PSU stocks without directly purchasing shares.
3. ETFs: Exchange-Traded Funds (ETFs) track the PSU index, allowing investors to invest in a basket of PSU stocks.
4. Government Disinvestment Programs: The government periodically sells its stake in PSUs through disinvestment programs. These offers allow retail investors to purchase shares at potentially attractive prices.

How to Choose the Best PSU Stocks to Invest in?

When you are looking at the best PSU stocks, there are certain factors you should consider:

1. Financial Performance: You can analyse a company’s financial statements, such as revenue, profit margins, and debt levels, to gauge its performance.
2. Dividend History: If consistent dividend payouts are important to you, check the company’s dividend track record.
3. Sector Outlook: Since PSUs operate in critical sectors, it’s essential to look at the overall sector performance and future growth prospects.
4. Government Policies: Government initiatives and policy changes can significantly impact PSU stocks. You might want to stay updated on any policy changes related to disinvestment or sector reforms.
5. Market Capitalization: Investing in larger, more established PSUs can provide more stability. You can check the PSU company list to find the biggest players in the sector.

Advantages of Investing in PSU Stocks

Investing in PSU stocks offers several potential benefits:

• Government Backing: Since the government has a vested interest in PSUs, these companies often receive support during times of financial trouble.
• Stable Dividends: As mentioned earlier, PSU stocks are known for their stable dividend payouts, providing a regular income stream to investors.
• Lower Risk: Public sector undertakings may involve less risk than some private-sector stocks due to their government backing and strategic importance.
• Long-Term Investment Potential: While PSUs may not provide explosive growth, they can offer slow, steady appreciation for long-term investors.

What Are the Risks of Investing in PSU Stocks?

Despite the benefits, investing in government stocks comes with certain risks that you should be aware of:

1. Bureaucratic Control: Many PSU companies are subject to bureaucratic procedures, which can slow down decision-making and affect profitability.
2. Lack of Innovation: PSUs may be slower to adopt new technologies and innovations compared to private companies, which could limit their growth potential in rapidly changing industries.
3. Political Influence: Public sector undertakings are often subject to political pressures, which can sometimes lead to decisions that are not in the best interests of shareholders.
4. Disinvestment Risk: While disinvestment can unlock value, it can also lead to volatility in stock prices when the government decides to sell its stake.

Things to know before investing in PSU stocks

• The government has set disinvestment targets to reduce their stake in PSUs and encourage private participation.
• Since PSU stocks are closely related to the core sectors of the economy, in addition to the regular key metrics, tracking economic indicators such as the GDP, employment generation, and others can help measure the performance of PSU stocks in a better way.
• PSU stocks in India are relatively stable compared to private-sector peers. As these are government-backed, they are not allowed to fail in most cases.
• These stocks are known to offer attractive dividends. However, they are slow movers when it comes to capital appreciation.

As in any case, you should only invest in PSU stocks after analysing them thoroughly. Use Tickertape’s Stock Pages to access a wealth of information about PSU companies. You can access details on financials, holdings, and corporate actions to make data-backed investment decisions.

To Conclude

Investing in PSU stocks can offer a unique combination of stability, consistent dividend payouts, and lower risk, thanks to government backing and the essential nature of the sectors in which these companies operate. However, as with any investment, there are potential risks, including political influence and bureaucratic control, which investors should consider. Whether you’re looking for long-term value or a stable income source, understanding the PSU sector and making informed choices can help you navigate this space effectively. Always remember to assess financial performance, sector outlook, and government policies before investing in public sector undertakings in India.

Frequently Asked Questions (FAQs)

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