5 Midcap PSU Stocks That Tripled the Market's Return in FY24

In financial year 2024, Indian share markets broke several records.

From topping the overall market cap of listed companies... record inflows in SIPs... to bumper IPO listings...

...we watched it all.

Benchmark indices Sensex and Nifty rallied 25% and 28%, respectively, outperforming most major market indices globally.

Broader markets rallied even more with the smallcap index registering around 76% gain, closely followed by 61% gains for the midcap index.

Individual stock performance was so remarkable that select stocks from the index more than tripled the market's return.

Let's look at 5 such stocks from the mid-cap space.

#1 IRFC

Coming at the top of the list is none other than IRFC.

With gains of over 420% in FY24, the company has surpassed the midcap index returns by a huge margin.

This sharp rally has even qualified the company to be part of the Nifty Next 50 index.

That's right... IRFC is set to enter the Nifty Next50 index alongside four other stocks.

The government recently announced a massive investment of around Rs 7 trillion for the development of rail infrastructure. This move is expected to primarily benefit railway PSUs like IRFC.

IRFC's principal business is to borrow funds from the financial markets to finance the acquisition/creation of assets, which are then leased out to the Indian Railways.

This massive capital-intensive project by the government will create a substantial funding requirement for the Indian Railways. IRFC, established as its dedicated financing arm, is perfectly positioned to benefit.

Analysts are expecting the company to continue reporting good numbers in future quarters as well as given the government's focus on the sector, which will need massive capital infusion.

IRFC plans to diversify its financing portfolio in future. This evolution will encompass new dimensions of railway projects, notably dedicated freight corridors, high-speed rail initiatives, and the development of smart railways.

#2 REC

Next is REC, which is also another firm like IRFC that made its entry to the prestigious Nifty Next 50 index.

REC share price rallied over 290% in FY24, outperforming the midcap index's 61% gains by a big margin.

A big factor that drove the rally in REC shares in the year gone by was its focus on the solar energy sector.

The company is involved in several renewable energy projects and has been appointed as the overall program implementation agency for the Rooftop solar mission.

Apart from that, it has also diversified into non-power infrastructure and logistics, financing projects such as railways, airports, and ports.

What's more, REC has not added any new NPA in the last eight quarters.

This Navaratna company enjoys strong support from its parent company, PFC, and is the nodal agency for the government's Revamped Distribution Sector Scheme (RDSS).

Being a primary beneficiary of the government's new scheme, REC has an opportunity to grow its loan book.

The Modi government is targeting one crore households by December 2024, which shows the aggressive expansion plan and the big opportunity for REC.

#3 SJVN

Third on this list is SJVN.

Trumping the midcap index's 61% gain, share price of this power company surged around 279% in FY24.

India's ambitious green goals are attracting significant investments in solar, wind and other clean sectors, which directly benefits power companies like SJVN.

SJVN, jointly held by the government of India and the government of Himachal Pradesh, is in the business of power generation and engineering consultancy.

The company is majorly into hydropower production, pumped-storage power plants and wind & solar power. Over the years, it has built a sizable presence with its six installed plants across Arunachal Pradesh, Uttarakhand, Himachal Pradesh and Nepal.

Last year, the company, aiming to foraying into solar and wind energy sectors, established a subsidiary called SJVN Green Energy.

Going forward, the company is aspires to diversify its business operations and establish a prominent presence in the clean energy sector.

As part of its proactive efforts to diversify into clean energy, SJVN has outlined an extensive plan to ramp up its capacity to 30,000MW by fiscal 2023 and 40,000MW by fiscal 2040. In fiscal 2024, the company aims to spend over Rs 100 bn on capex and Rs 120 bn in the following year.

#4 BHEL

Next on this list is Bharat Heavy Electricals (BHEL).

In financial year 2024, BHEL share price moved up by 264% as against the broader midcap index's 61% surge.

The company is the flagship engineering and manufacturing company of India owned and controlled by the Govt. of India.

It has capabilities to manufacture the entire range of power plant equipment including thermal, gas, hydro and nuclear power projects.

BHEL is undergoing a strategic transformation, moving from a revenue-centric approach to a project-centric one. This turned out to be a winning formula as the company doubled its erection tonnage at project sites over the past three years, reaching 0.5 MT in FY 2022-23.

In FY23, the company commissioned the largest floating solar power plant of India with 100 MW capacity at NTPC Ramagundam in Telangana.

Last year, it invited bids for the design, supply, and assembly of a floating system and associated anchoring and mooring to develop a 300 MW AC floating solar power project in Odisha.

BHEL also secured Rs 235.5 bn worth of orders - the highest in the past five years. After a four-year hiatus, it emerged victorious by winning the 2 x 660 MW NTPC Talcher Thermal Power Plant order.

With a total outstanding order book of Rs 913.4 bn as of December 2023, BHEL is experiencing its strongest position in four years.

#5 Power Finance Corp (PFC)

Last on this list is Power Finance Corporation (PFC).

In FY24, PFC share price moved up by 223% against the 61% gains achieved by the broader midcap index.

You see... FY24 was a great year for the markets. Almost every sector delivered decent gains. Some sectors outperformed. Some prominent examples were power stocks, PSU stocks, and financial stocks.

And PFC was one such stock that fit into all three categories.

There were a few solid reasons for the company's sharp run up.

PFC has become aggressive in giving loans to the renewable energy sector over the last few years. It has grown its renewable energy portfolio at around 20% CAGR over FY19-23.

As far as financials go, PFC has done well recently. Its net interest income and net profit have grown at a CAGR of about 10% over the last 5 years.

Its aggressive lending has caused an increase in provisioning.

However, the company has made significant efforts to collect pending payments from discoms in FY24. As of 31 December 2023, its net non-performing assets (NPA) fell to 0.86% compared to 1.15% from to the same period a year ago.

The company is also a good dividend payer. Except for FY19, PFC has been consistently paying dividends since 2007. The dividend payout ratio stands at 22%.

It's clear that the reason for the run up in the stock was the company's push towards giving loans to the renewable energy sector. This has ensured that the growth in net interest income and thus the net profit, has remained solid and consistent.

The market has priced in the multiple positive changes to the company's long-term prospects, in just about 15 months or so. Instead of a steady rise upward, the stock went up almost parabolically.

It remains to be seen how the stock performs in FY25.

Which Other Stocks Tripled the Market's Return in FY24?

Apart from the above, here are some other midcap stocks that tripled the index's returns by 3x.

Best Performing Midcaps 2024

Company	Current Price (Rs)	FY24 Returns (%)
Trent Ltd.	3885.75	186%
Indian Overseas Bank	64.73	179%
Oracle Financial Services Software Ltd.	8949.95	173%
Torrent Power Ltd.	1422.10	173%
Macrotech Developers Ltd.	1169.05	156%
General Insurance Corporation of India	344.45	153%
Lupin Ltd.	1623.40	149%
The New India Assurance Company Ltd.	239.90	143%
Solar Industries India Ltd.	8723.25	133%
Union Bank Of India	156.70	131%

Source: Equitymaster

In Conclusion

The above-mentioned midcap companies have strong fundamentals and businesses with bright growth prospects.

However, you cannot ignore the fact that these companies have had their fair share of volatile periods.

Therefore, if you plan to invest in a company, assess the fundamentals and prospects of the business.

Sustained research must not be compromised despite the positive odds.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...