Investing in Public Sector Undertaking (PSU) stocks offers a unique opportunity for investors looking to balance stability with potential returns. These companies are often considered more resilient during economic downturns due to their government backing and essential nature. With attractive dividend payouts and the potential for long-term growth, PSU stocks are a popular choice for conservative investors seeking reliable returns. In this article, we will explore PSU stocks to watch for 2025.
| Company Name | Market Cap | 5Y CAGR (%) | ROE (%) |
| Rail Vikas Nigam Ltd | 92,001.51 | 81.94 | 19.69 |
| Hindustan Aeronautics Ltd | 3,02,376.58 | 65.04 | 28.91 |
| Bharat Electronics Ltd (BEL) | 2,28,686.43 | 55.91 | 26.37 |
| Bharat Dynamics Ltd | 44,566.67 | 52.38 | 17.89 |
| REC Limited | 1,43,155.22 | 42.10 | 22.19 |
Note: The stocks mentioned above were selected from the PSU sector as of December 10, 2024, and sorted based on 5Y CAGR
Rail Vikas Nigam is involved in the implementation of various types of rail infrastructure projects assigned by MoR, including doubling, gauge conversion, new lines, railway electrification, major bridges, and workshops. During Q2 FY25, RVNL’s net profit fell 27% YoY to ₹286.9 crore because of lower operating margins and reduced earnings. Revenue from operations for the rail PSU slipped 1.2% YoY to ₹4,855 crore, compared to ₹4,914.3 crore in Q2 FY24.
Recently, RVNL has received a Letter of Acceptance from East Central Railway for “Design, Supply, Erection, Testing & Commissioning of Traction Sub Stations with a value of ₹186 crore, which happens to be an addition to RVNL’s revenue for FY25.
Hindustan Aeronautics Limited (HAL) is engaged in the manufacturing, repair and maintenance of aircraft and helicopters. During Q2 FY24, HAL’s revenue increased by 6%YoY to ₹5,976.3 crore. Net profit for the period increased by 22% from last year to ₹1,510.5 crore from ₹1,236.7 crore.
Bharat Electronics Ltd manufactures and supplies electronic equipment and systems to the defence sector. Bharat Electronics recorded a remarkable growth trajectory in Q2 FY25, wherein the company’s revenue rose by 14.86% YoY, while profit soared by an impressive 38.4%.
Bharat Electronics has recently secured additional orders worth ₹634 crore, which helped the company to increase its order book to ₹8,828 crore for FY25.
Bharat Dynamics Ltd manufactures and supplies guided missiles, underwater weapons, airborne products, and allied defence equipment for the Indian Armed Forces. As of September 30, 2024, the company’s order book stood at ₹18, 852 crore and for the 2-3 years, the order pipeline stood at ~ ₹20,000 crore.
REC is a Central Public Sector Undertaking under the Ministry of Power involved in financing projects in the complete power sector value chain from generation to distribution. As of September 30, 2024, the company reported outstanding borrowings of ₹4,75,832 crore against ₹4,37,944 crore as of September 30, 2023. In addition, REC recorded a consistent increase in share price from ₹291.80 on October 3, 2023, to ₹554.50 as of September 30, 2024, an increase of ~ 90% within one year.
The Nifty PSE Index comprises companies in which the Central Government and/or State Government, directly or indirectly, owns 51% of outstanding share capital. As of November 29, 2024, the Oil, Gas & Consumable Fuels sector held 33.58% PSE Index followed by Power, Capital Goods, and Financial Services with 27.76%, 18.19% and 13.21%, respectively.
The PSE index generated a return of ~29.39% in the past 5 years. From January 1, 2024, to December 6, 2024, the Nifty PSE Index recorded a return of 29.6%.
The market correction in 2024 for public sector enterprises (PSUs) has resulted in a severe decrease in their valuations. By November 2024, 38 PSU equities had dropped more than 20% from their 52-week highs. The fall significant fall was fueled by weak Q2 FY25 results, as well as broader economic factors such as slowed GDP growth and reduced government investment. Below is a table of three PSEs away from their 52W High.
| Company Name | Market Cap | % Away From 52W High |
| Coal India Ltd | 2,56,770.08 | 29.91 |
| NTPC Ltd | 3,61,443.23 | 21.48 |
| Power Grid Corporation of India Ltd | 3,02,316.13 | 11.54 |
The PSU stocks possess potential rebound in 2025 on the back of government reforms, increased spending on infrastructure, and sectoral restructuring. The key events such as the annual budget for 2025, and key statistics data such as inflation, GDP, and others. However, like any share, PSU comes with their own set of challenges, from bureaucratic inefficiencies to government interference.
PSU stocks present a compelling investment opportunity for those seeking stability and the potential for long-term capital appreciation. While these stocks can offer a cushion against market volatility, investors must carefully assess the fundamentals, government policies, and sector-specific dynamics before making investment decisions.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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