Best 5 PSU Stocks in India 2024

India’s economic landscape is shaped by a network of powerful entities known as PSUs (Public Sector Undertakings). These organisations play a crucial role in driving national growth across various sectors.

PSUs are integral to India’s development, from powering our homes to fueling our industries. They showcase a robust partnership between the public sector and economic growth initiatives, strengthening India’s industrial landscape.

What are Public Sector Undertakings (PSU)?

Public Sector Undertakings (PSUs) in India are government-owned corporations or enterprises operating in various economic sectors. PSUs are characterised by majority ownership and control by the government (above 50%), typically through ministries or departments, and they operate with the dual objectives of commercial viability and public welfare.

PSUs operate in sectors such as energy, banking, insurance, manufacturing, telecommunications, infrastructure, mining, and more. Let’s now explore a few of the best-ranked PSU stocks according to market capitalisation.

India’s Best PSU Stocks Ranked by Market Capitalisation

Note: The above list of PSU stock data is as of May 14, 2024. The above stocks are sorted from highest to lowest on the basis of market capitalisation.

The following parameters were used to get the list:

• Market Capitalisation: Above ₹2 lakh crore
• 3-Year CAGR should be above 30%
• 5-Year Return on Equity should be positive.
• The companies should have a high dividend yield.

Brief Overview of the PSU Stocks

1. National Thermal Power Corporation (NTPC): Founded in 1975, NTPC is a key player in power generation in India. It operates numerous power stations nationwide, contributing significantly to energy production and management. NTPC’s activities span power generation, project management, energy trading, and oil and gas exploration involvement.Key metrics:
   
   • 1-yr return: 100.57%
   • PE ratio: 17.69%
   • ROCE: 9.83%
   • Dividend Payout: 41.0%
2. Oil & Natural Gas Corporation (ONGC): Established in 1993, ONGC, or Oil & Natural Gas Corporation, is a prominent PSU in India. It focuses on oil exploration and production, leading in the crude oil and natural gas sectors. Key subsidiaries include ONGC Videsh Limited, Mangalore Refinery and Petrochemicals Limited, Hindustan Petroleum Corporation Limited, HPCL Biofuels Limited, and Petronet MHB Limited.Key metrics:
   
   • 1-yr return: 61.27%
   • PE ratio: 7.34%
   • ROCE: 13.9 %
   • Dividend Payout: 32.2%
3. Power Grid Corporation of India Limited (POWERGRID): Established in 1989, POWERGRID is a Maharatna PSU involved in power transmission and related services. It operates under government ownership and contributes significantly to India’s power infrastructure. POWERGRID’s activities include planning, implementing, operating, and maintaining Inter-State Transmission Systems and telecom and consultancy services.Key metrics:
   • 1-yr return: 68.00%
   • PE ratio: 18.4%
   • ROCE: 13.1%
   • Dividend Payout: 60.0%
4. Coal India Ltd: A pillar of India’s economy since 1975, Coal India Ltd specialises in coal mining across eight states in India. With over 300+ mines, including underground and opencast operations, it plays a crucial role in the country’s energy sector. Coal India Ltd manages subsidiaries like Bharat Coking Coal Limited, Central Coalfields Limited, and Mahanadi Coalfields Limited, among others.Key metrics:
   • 1-yr return: 87.00%
   • PE ratio: 7.4%
   • ROCE: 65.1 %
   • Dividend Payout: 51.8%
5. Indian Railway Finance Corp (IRFC): Established in 1986, IRFC manages finances for Indian Railways. It primarily borrows funds from financial markets to finance railway assets, which are then leased out under finance leases. IRFC’s role is pivotal in ensuring financial stability and support for Indian Railways’ infrastructure development.Key metrics:
   • 1-yr return: 337.48%
   • PE ratio: 33.8%
   • ROCE: 5.32 %
   • Dividend Payout: 30.7%

Why Invest in PSU Stocks?

Now that we are aware of what PSU stocks are let’s look at some characteristics that make them a desirable investment for investors:

• Stability and Assurance: Government backing ensures stability, making them attractive during market uncertainties.
• Dividend Income: Consistent profit sharing with shareholders offers a reliable income source.
• Long-Term Growth: Offers sustainable growth over time, suitable for investors prioritising steady returns.
• Economic Contribution: Directly contributes to critical sectors like energy, telecom, and infrastructure, driving economic progress.
• Diversification: Adds diversification beyond private companies, mitigating sector-specific risks.
• Resilience: Demonstrates resilience in volatile markets due to conservative management and essential services focus.
• PSB Distinction: Public-Sector Banks (PSBs) offer a unique structure with majority government ownership (more than 50%), reflecting collective performance through indices like Nifty PSU Bank and BSE PSU Index.

Factors to Consider Before Investing in PSU Stocks

• Government Policies and Reforms: Monitor government policies affecting the PSU’s sector. Privatisation plans, initiatives, and regulatory changes can impact stock performance.
• Sector Outlook: Understand the sector’s prospects where the PSU operates. Analyse demand-supply, technology, regulations, and industry trends.
• Financial Performance: Evaluate the PSU’s financial health. Check revenue growth, debt levels, profitability, and past financial statements.
• Risks and Challenges: Identify risks like technology shifts, regulations, and operational issues specific to the PSU and its industry.
• Dividend Yield and Payout Ratio: Consider dividend payouts. Assess the PSU’s ability to generate consistent dividends and fulfil shareholder commitments.

Are PSU Stocks a Good Investment?

India is home to many PSUs that play an important role in the economy. Even if PSU stocks seem promising, political agendas, privatisation, regulatory changes, and other factors might impact their performance.

Conducting thorough research is paramount before investing in PSU and bank PSU stocks. Consider each PSU’s industry dynamics, financial stability, and government policies to make informed decisions. In addition, you should monitor market movements closely and reassess your investment choices regularly to ensure they suit your risk tolerance and financial goals.

Conclusion

PSU equities have appealing values and dividend yields, but investors need to do their homework to find the best deals. The continuous wave of privatisation and reforms is changing the PSU environment. Diversify your portfolio with PSU stocks today! Open your demat account with Angel One to start investing.

Disclaimer: This blog exists only to provide educational content. There is no recommendation for the stocks or investments mentioned here.