Top PSU Shares in India 2024: PSU Companies to Add to Your Watchlist

Public sector undertakings (PSUs), once viewed with scepticism due to concerns about bureaucracy and lagging performance, have been transforming.

This is partly due to the Modi government's push for a more developed "New India."

Many Top PSU stocks have soared in value (3-15 times) over the past decade.

If the government keeps investing heavily (high capex), PSU stocks could become even more valuable.

The evolving PSU landscape presents opportunities for investors. However, careful research remains crucial.

Analyse company financials, evaluate the long-term prospects of the PSU's sector, and stay informed about government initiatives that might impact the PSU's performance.

With this in mind, let's break down the PSU value chain.

#1 National Mineral Development Corporation

National Mineral Development Corporation (NMDC), is India's premier iron ore producer.

It boasts vast reserves of approximately 1.9 billion (bn) tonnes, including those from NMDC-CMDC, and produces around 41 million tonnes (MT) annually.

The company operates mines primarily in Chhattisgarh (71%) and Karnataka (29%), with its iron ore renowned for its high quality.

The state-owned miner primarily caters to the domestic market, pricing its ore based on e-auction markets in Chhattisgarh and Karnataka, alongside domestic demand-supply dynamics.

Apart from ore, it explores and extracts minerals, diamonds and silica.

NMDC is well-placed to meet global steelmakers' demand for high-quality iron ore, leveraging its efficient logistics and consistent product quality.

Additionally, its venture into downstream steel production bolsters its market presence.

NMDC's strategic investments in data analytics and automation optimise its mining operations and logistics.

As a public sector undertaking, NMDC enjoys policy tailwinds and regulatory support from the government.

This translates to easier access to resources and permits, facilitating faster growth.

With a sturdy financial position, minimal debt, and healthy cash reserves, NMDC has the flexibility to pursue strategic acquisitions and investments.

NMDC Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	4.97%	-4.14%	28.72%	69.72%	-30.91%
Operating Profit Margin (%)	61.82%	55.70%	59.47%	51.39%	38.61%
Net Profit Margin (%)	38.16%	30.79%	40.64%	36.36%	31.35%
Return on Capital Employed(%)	28.19%	22.42%	29.65%	50.51%	36.04%
Return on Equity (%)	18.38%	13.41%	21.71%	39.42%	27.26%

Data Source: Ace Equity

The business has performed admirably in the past 5 years. Between 2019-2023, the sales and net profit have registered a 5-year compound annual growth rate (CAGR) of 8.7% and 7.8%, respectively.

The returns have been strong, with the Return on Equity (RoE) and Return on Capital Employed (RoCE) averaging at a healthy 33.3% and 24%, respectively.

To know more about the company, check out its financial factsheet and latest financial results.

#2 Mazagaon Dock Shipbuilders

Mazagon Dock Shipbuilders Limited, a jewel of India's defence sector, builds and repairs warships, submarines and other vessels for the Indian Navy, Coast Guard and ONGC.

The company's diverse portfolio encompasses cargo ships, passenger liners, water tankers, fishing vessels, destroyers, submarines, and corvettes.

Between 2019-23, the company has reported consistent growth with sales and net profit climbing at a 5-year CAGR of 11.2% and 21.6%.

The returns have been admirable, with the RoCE and RoE averaging at 24.4% and 16.3%, respectively.

The company has achieved this growth without incurring any debt.

For the third quarter and for the nine months ended December 2023, MDL registered the highest-ever profit.

The company is planning heavy capital expenditure for its dry dock over the next 2.5 years, which could lead to higher sales and bottom line.

It is venturing beyond shipbuilding, exploring underwater heavy engineering equipment and offshore platforms.

Additionally, it is making efforts to export offshore patrol vessels to countries in Southeast Asia, Latin America, and Africa.

Mazagaon Dock Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	3.13%	4.97%	-15.39%	32.91%	38.58%
Operating Profit Margin (%)	18.47%	16.74%	19.77%	14.87%	19.03%
Net Profit Margin (%)	10.19%	7.69%	11.20%	9.82%	13.36%
Return on Capital Employed(%)	25.99%	23.58%	18.94%	20.97%	32.81%
Return on Equity (%)	15.52%	12.02%	13.97%	15.45%	24.28%

Data Source: Ace Equity

To know more about the company, check out its financial factsheet and latest financial results.

#3 Engineers India

Engineers India is a one-stop shop for project management, consultancy and engineering services catering to the hydrocarbon, petrochemicals, fertilizers, and infrastructure sectors.

The company is actively involved in designing and consulting for solar, wind, and hydrogen projects, capitalising on this green wave.

It has a strong presence in both domestic and international markets, with an engineering office in Abu Dhabi catering to the business needs in UAE/Middle-East region.

This global presence allows the company to tap into diverse markets and opportunities.

The business has performed admirably in the past 5 years. Between 2019-2023, the sales have registered a 5-year CAGR of 11.9%.

The returns have been strong, with the RoE and RoCE averaging at a healthy 24.1% and 16.9%, respectively.

Engineers India Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	34.48%	29.53%	-4.78%	-8.09%	15.28%
Operating Profit Margin (%)	24.20%	21.95%	17.20%	16.34%	14.25%
Net Profit Margin (%)	15.06%	13.40%	8.32%	11.78%	10.34%
Return on Capital Employed(%)	24.63%	28.91%	17.42%	25.69%	24.04%
Return on Equity (%)	15.92%	18.27%	12.58%	19.48%	18.45%

Data Source: Equitymaster

As of December 2023, Engineers India's order book was at a healthy Rs 79 bn, with projects across diverse sectors.

To know more about the bank, check out its financial factsheet and latest financial results.

#4 State Bank of India (SBI)

State Bank of India (SBI) boasts an unmatched retail franchise in the Indian banking landscape.

The bank's strong corporate ties, especially with high-rated PSUs help it retain its market share in competitive segments.

With a significant share of low-cost current and savings account (CASA) deposits at 41-42%, SBI can offer more competitive loan rates.

Additionally, it has maintained superior asset quality compared to other public sector banks.

Despite past challenges, SBI's financial health has significantly improved over the years.

From 2019 to 2023, the bank's advances grew at a Compound Annual Growth Rate (CAGR) of 10.8%, and its net profit increased 18 times.

This progress is reflected in its Non-Performing Asset (NPA) ratio, which dropped remarkably from 5.7% in 2018 to 0.4% in 2023, now even lower than HDFC Bank's consistent sub-0.5% NPA ratio.

State Bank of India Financial snapshot (2018-2022)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Net Profit Growth (%)	-173.30%	492.30%	33.60%	49.70%	55.60%
Advances Growth (%)	13.60%	6.60%	5.30%	11.70%	17.00%
Deposits Growth (%)	8.00%	11.30%	13.50%	10.00%	9.30%
Return on Equity(%)	1.50%	8.30%	10.10%	13.60%	18.40%

Data Source: Ace Equity

The banking giant is confident of growth going forward led by the government's capital outlay plans and an uptick in the credit demand across the country.

Moreover, it is confident in generating sufficient capital organically to fund the growing business.

To know more about the bank, check out its financial factsheet and latest financial results.

#5 Bharat Electronics

A government entity, Bharat Electronics is a primary provider of radar, communication and electronic warfare equipment to the Indian armed forces.

Their product portfolio is quite diverse, encompassing defence and non-defence products such as software and electronic manufacturing services.

In addition to serving the domestic market, the company also exports its goods to various nations, such as Botswana, Indonesia, Sri Lanka, Russia, the United States, and South Africa.

Over the years, Bharat Electronics has established multiple growth drivers by developing a robust infrastructure, fostering strong relationships with government entities and venturing into non-defence sectors.

The company, in the December 2023 ending quarter announced that it's order book has surged past the initial target of Rs 200 bn.

It reported that it has already secured Rs 267 bn in orders, and the momentum continues.

Bharat Electronics Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	14.06%	7.43%	7.25%	9.53%	15.91%
Operating Profit Margin (%)	24.51%	22.04%	23.66%	23.25%	24.64%
Net Profit Margin (%)	15.19%	13.82%	14.66%	15.31%	16.58%
Return on Capital Employed(%)	30.50%	25.73%	27.92%	27.20%	30.15%
Return on Equity (%)	21.45%	18.59%	19.59%	20.17%	22.49%

Data Source: Ace Equity

Between 2019-23, the company's sales and net profit grew at a 5-year CAGR of 10.7% and 15.8%, respectively.

The 5-year average RoCE and RoE stood at 28.7% and 20%, respectively.

The consistent expansion in operating margin comes from an increasing level of indigenisation and a strong channel of local supply chains.

To know more about the company, check out its factsheet and latest quarterly results.

#6 ONGC

ONGC is India's largest crude oil and natural gas producer, accounting for roughly 70% of the country's domestic production.

Its wholly-owned subsidiary, ONGC Videsh, is the largest Indian multinational in the energy space, participating in 36 oil and gas properties across 17 countries.

Over the years, the company has maintained a healthy mix of mature and new oil fields to ensure continuous production growth.

Moreover, it has been proactively implementing well interventions and advancing new well-drilling activities.

Recently (May 2024), the company announced that its deep-water block in the Krishna-Godavari basin will boost oil/gas production, expecting it to rise 15-22% by the financial year 2027.

This will boost ONGC's overall oil and gas output over the coming three years. Apart from this the company is ramping up its production in the same field by the second half of 2025.

ONGC Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	28.50%	-6.10%	-22.40%	57.60%	28.40%
Operating Profit Margin (%)	18.20%	14.50%	16.50%	16.60%	12.40%
Net Profit Margin (%)	7.40%	2.70%	5.90%	9.20%	4.80%
Return on Capital Employed(%)	19.30%	8.40%	11.00%	17.30%	13.60%
Return on Equity (%)	16.10%	5.40%	10.00%	20.50%	12.10%

Data Source: Ace Equity

Between 2019-2023, the sales and profit growth has been resilient, growing at a 5-year CAGR of 13.6% and 4.7%, respectively.

The RoCE and RoE has been rangebound, averaging at 13.9% and 12.8%, respectively.

The relatively robust performance of the business comes from the rally in the crude oil prices and growing production.

The company is allocating Rs 300 bn annually for its core exploration and production activities. Moreover, the oil major aims to set aside surplus cash for future investments, a calculated shift beyond conventional E&P.

Leading the charge into new territory is ONGC's investment in OPaL, a green energy initiative. It also aims to invest around Rs 1 trillion (tn) by 2030 in renewable energy.

To know more about the company, check out its financial factsheet and latest financial results.

#7 Coal India

Coal India, the world's largest coal producer, accounts for 80% of India's total coal production.

It serves as the primary supplier to power plants and other coal-dependent sectors, dominating the Indian coal market.

Coal India operates open-cast mines that account for 90% of its production. It produces coal via seven different wholly-owned (100%) subsidiaries.

The company supplies a majority of its produce to the power sector through Fuel Supply agreements (FSA). The coal produced after meeting FSA demand is sold through e-auctions.

The coal sold under the E-auction scheme is determined based on prevailing market prices and is significantly higher than the price of raw coal sold under the FSAs.

In the nine months ending financial year2024, the company sold 10.5% of its production via e-auction.

For the nine months ending financial year 2024, this coal giant reported its highest-ever production at 531.9 MT, marking an 11% year-over-year increase.

Its revenue hit Rs 1.04 trillion, and net profits soared to Rs 238 bn.

This impressive growth was largely driven by strong demand from key sectors like power and steel. Additionally, Coal India successfully filled the gap left by imported coal, further bolstering its performance.

Coal India Financial Snapshot (2019-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	16.30%	-2.90%	-8.30%	20.80%	27.50%
Operating Profit Margin (%)	14.20%	10.90%	20.90%	19.70%	16.60%
Net Profit Margin (%)	7.40%	5.40%	11.80%	11.80%	9.40%
Return on Capital Employed(%)	46.70%	45.50%	108.70%	73.10%	46.10%
Return on Equity (%)	31.30%	31.50%	74.90%	57.00%	37.00%

Data Source: Ace Equity

Between 2019-2023, the company reported a sales and net profit CAGR of 9.8% and 31.9%, respectively.

The returns have been phenomenal with the RoE and RoCE averaging at 53.7% and 70.8%, respectively over a 5 year period.

To know more about the company, check out its financial factsheet and latest quarterly results.

#8 IREDA

IREDA is India's largest pure-play green financing NBFC.

The government-owned entity facilitates the financing and development of new renewable energy projects, as well as projects aimed at enhancing energy efficiency and conservation.

It provide a wide range of financial products and services, covering everything from project inception to post-commissioning, for renewable energy (RE) projects and related activities like equipment manufacturing and transmission.

IREDA provides a line of credit to other NBFCs for on-lending to RE and EEC projects. In addition, it provides loans to government entities and financing schemes for RE suppliers, manufacturers and contractors.

The state-owned NBFC enjoys a geographically diversified portfolio, with term loans outstanding across 23 states and five union territories across India, as of September 30, 2023.

All of this explains the massive growth in the business over the years.

IREDA Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	10.10%	17.30%	12.00%	8.10%	21.20%
Net Profit Margin (%)	12.40%	9.10%	13.00%	22.20%	24.80%
Return on Capital Employed(%)	7.70%	7.40%	8.30%	8.10%	8.20%
Return on Equity (%)	10%	8.40%	12.60%	15.30%	15.40%

Data Source: Ace Equity

Between 2019-2023, the revenues have expanded at a 5-year CAGR 13.6%. The company's net profit also rose from Rs 3.5 bn in March 2021 to Rs 8.6 bn in March 2023.

The 5-year average RoE and RoCE stand at 12.4% and 8%, respectively.

Despite expanding its loan book the company has improved its asset quality, reflected in the falling net Non-Performing Assets (NPA) numbers.

The net NPA fell from 5.6% in the financial year 2021 to 1.7% in 2023. For the nine months ending December 2023 the Net NPA stood at 1.5%.

It is gearing up for growth in the coming years, capitalising itself. In the nine months ending December 2023, the lender raised Rs 51 bn through borrowing. Recently, IREDA declared a fresh fundraising plan of Rs 242 bn through borrowings.

To know more about the company, check out its financial factsheet and latest quarterly results.

#9 RITES

RITES, a central public sector undertaking within the Ministry of Railways, is renowned for its diverse expertise in engineering and consultancy.

The company provides a wide array of services covering the entire project lifecycle, from inception to completion, across various aspects of transportation infrastructure and associated technologies.

A string of recent order wins has bolstered RITES' near-term revenue visibility.

These include a Rs 4.1 bn contract for infrastructure development at IIT-Bhubaneswar, a Memorandum of Understanding to support North Eastern Electric Power Corporation (NEEPCO) with rail infrastructure projects, and a Rs 3.1 bn pact with CFM Mozambique for the supply of diesel locomotives.

These triumphs contribute to RITES' robust order book position, which stood at a healthy Rs 54 bn as of the December 2023 quarter.

Significantly, nearly half of this order book comprises high-margin consultancy services, ensuring strong profitability.

Between 2019-2023, the sales and net profit have registered a 5-year CAGR of 10.6% and 9.9%, respectively.

The returns have been strong, with the RoCE and RoE averaging at 29.9% and 21.7%, respectively.

Rites Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	35.72%	22.05%	-26.69%	36.92%	-0.56%
Operating Profit Margin (%)	33.59%	33.43%	29.90%	27.64%	28.21%
Net Profit Margin (%)	21.38%	22.98%	20.46%	18.44%	19.03%
Return on Capital Employed(%)	31.20%	34.29%	23.48%	30.07%	30.52%
Return on Equity (%)	21.13%	25.05%	17.68%	22.07%	22.42%

Data Source: Ace Equity

Looking ahead, RITES aspires for double-digit bottom-line growth. It is witnessing encouraging growth in the quality assurance sector, particularly among non-Indian Railway clients.

RITES is actively pursuing international expansion, targeting new markets with different railway gauges, particularly those employing cape gauge.

Looking ahead, the company anticipates a stable annual revenue base of approximately Rs 4-5 bn from rolling stock exports.

To know more about the company, check out its financial factsheet and latest quarterly results.

#10 Rail Vikas Nigam

Rail Vikas Nigam (RVNL), established in 2003 by the Indian government, is a critical player in the country's rail infrastructure development.

The company acts as the Ministry of Railways' execution arm, undertaking various projects including doubling existing lines, gauge conversion, new line construction, major bridges, and railway electrification.

RVNL is expanding its reach into metro line development for major cities and suburban networks.

So far, the company has a successful track record, having completed 120 projects with 72 currently underway.

Between 2019-2023, the revenues and net profit have grown at a 5-year CAGR of 21.8% and 20.1%.

The returns have been robust, with the RoCE and RoE averaging at 15.2% and 18.1%, respectively.

RVNL Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	31.30%	42.61%	8.82%	25.02%	5.43%
Operating Profit Margin (%)	8.59%	7.51%	10.51%	10.23%	11.06%
Net Profit Margin (%)	6.83%	5.21%	6.44%	5.73%	7.00%
Return on Capital Employed(%)	13.99%	12.19%	15.69%	16.27%	17.83%
Return on Equity (%)	16.53%	15.90%	18.44%	18.56%	20.81%

Data Source: Ace Equity

Recent recognition as a Navratna company grants RVNL greater autonomy in project execution, capital expenditure and international ventures.

This empowers it to attract top talent and pursue opportunities beyond India's borders. The company has already secured a significant overseas project worth approximately Rs 180 bn (bn) with Kyrgyzstan and is actively exploring further expansion.

RVNL's strong order book currently sits at over Rs 650 bn, encompassing railway, metro, and overseas projects.

Beyond geographical expansion, RVNL is also forging partnerships within the rolling stock manufacturing sector, solidifying its position in the rail ecosystem.

With a confident outlook and a target order book of Rs 750 bn to Rs 1 tn, RVNL is poised for sustained growth.

To know more about the company, check out its financial factsheet and latest quarterly results.

#11 Power Finance Corporation

Power Finance Corporation (PFC) is an established non-banking financial company (NBFC) that offers a variety of financing options, from short-term solutions to equipment leasing, for projects across the entire power spectrum (generation, transmission, distribution).

The lender has recently expanded into infrastructure and logistics, supporting e-vehicle fleets, charging stations, roads, ports, and even smart city initiatives. This diversification positions them to capitalize on India's massive infrastructure push.

Moreover, it is strategically placed to benefit from growth in both power and infrastructure due to its diversification into renewables (25% YoY growth in renewable loan portfolio to over Rs 600 bn in FY24, making it a leader in this space) and infrastructure expertise (disbursed Rs 700 bn in infrastructure loans by FY24, aiming to be a major player).

Further, the company bagged two major achievements in 2024 which will help in boosting its revenues.

In February, PFC signed a memorandum of understanding (MoU) with the Goa government to fund the state's green energy ambitions through a blended finance facility.

In January 2024, PFC received approval from the Reserve Bank of India to set up a finance company at the International Financial Services Centre (IFSC) in Gujarat's GIFT City.

PFC has been lending aggressively to the renewable energy sector over the last few years, growing its renewable energy portfolio at a 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.

PFC Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Net Interest Income Growth (%)		14.67%	22.84%	18.23%	-3.77%
Return on Assets(%)	2.22%	1.44%	2.15%	2.42%	2.53%
Return on Equity (%)	29.07%	19.64%	28.53%	28.34%	27.18%

Data Source: Ace Equity

It is aggressive lending has caused an increase in provisioning. As of the end of the financial year 2023, the amount set aside for bad loans was about Rs 1.7 bn.

However, the company has made significant efforts to collect pending payments from power distribution companies in 2024. As of December 2023, its net non-performing assets (NPA) fell to 0.86% compared to 1.15% from the same period a year ago.

The company's return on assets (ROA) and RoE are excellent at 2.5% and 20%, respectively.

To know more about the company, check out its financial factsheet and latest quarterly results.

It Doesn't End Here

The Modi government's pro-business stance and PSU-favourable policies have fuelled significant gains for PSU stocks in FY24. As the Indian economy, projected to be the world's fastest-growing, attracts foreign investment, PSUs could remain in focus.

However, the landscape of PSUs extends beyond these companies. There is also:

• Bank of Maharashtra: This public sector bank caters to a diverse clientele, offering financial services to individuals, businesses, and rural communities. As the Indian economy expands, Bank of Maharashtra is well-positioned to play a crucial role in facilitating growth across various sectors.
• Bharat Heavy Electricals Limited (BHEL): A household name in the power generation sector, BHEL isn't just focused on traditional methods. They're actively exploring renewable energy solutions, making them a vital player in India's clean energy transition.
• Dredging Corporation of India (DCI): As India focuses on developing its coastal regions and waterways, DCI's expertise in dredging and maritime infrastructure development becomes increasingly important. Their role in creating vital infrastructure positions them for growth alongside India's expanding maritime industry.
• Housing and Urban Development Corporation (HUDCO): Addressing the need for affordable housing and urban development solutions is crucial for India's growing population. HUDCO, with its focus on financing these initiatives, plays a significant role in shaping the future of Indian cities.

PSUs contribute significantly to India's economic and infrastructural development. Their diverse specializations and government backing suggest promising potential for future growth.

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...