Best PSU Stocks in India for 2024: Top Public Sector Companies to Invest In

Public Sector Undertakings (PSUs) are companies majority-owned by the government and often attract investors seeking stability, consistent dividends, and growth potential. Investing in PSU stocks can be strategic for portfolio diversification due to their lower risk profile and attractive valuations. Backed by government support, these companies operate in crucial sectors and offer long-term growth opportunities. In this guide, you will find a detailed list of some of the best PSU stocks to consider in 2024, including why one must invest in the government-owned companies in India, how to invest, factors to consider before investing, risks, benefits, and more.

List for the Best PSU Stocks in India

The following list of PSU Stocks has curated the best stocks in this sector for you! Here is a government shares list of India’s best PSU stocks.

Name	Sub-Sector	Market Cap (Rs. in cr.)	Close Price (Rs.)	PE Ratio	5Y Avg Return on Investment (%)	Debt to Equity (%)
Indian Railway Catering and Tourism Corporation Ltd	Online Services	80,528.00	1,002.95	72.48	31.08	3.4
NMDC Ltd	Mining - Iron Ore	71,609.35	251.1	12.84	24.48	1.87
Hindustan Aeronautics Ltd	Aerospace & Defense Equipments	357,396.70	5,460.00	46.9	21.31	0.22
RITES Ltd	Business Support Services	16,829.54	698.00	36.96	19.98	0.2
Bharat Electronics Ltd	Electronic Equipments	223,752.33	314.4	56.16	19.75	0.44
Mazagon Dock Shipbuilders Ltd	Shipbuilding	87,322.69	4,690.00	45.08	17.69	0.13
Bharat Dynamics Ltd	Aerospace & Defense Equipments	58,514.37	1,630.00	95.5	15.37	0.29
Engineers India Ltd	Construction & Engineering	14,486.64	262.75	32.54	14.75	0.96
NBCC (India) Ltd	Construction & Engineering	29,210.40	168.8	72.74	13.29	0.02
Cochin Shipyard Ltd	Shipbuilding	59,473.36	2,434.00	75.93	13.2	13.27

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data in the list of best penny stocks is from 3rd July 2024. This data is derived from Tickertape Stock Screener.

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

Overview of the Top 10 PSU Stocks List for 2024

The following is a top 10 government stock list based on 5-yr Return on Investment (ROI). Here is a brief overview of the best PSU Stocks in India 

Indian Railway Catering and Tourism Corporation Ltd

Founded in 1999, Indian Railway Catering and Tourism Corporation Ltd (IRCTC) is a subsidiary of the Indian Railways that provides catering, tourism, and online ticketing operations. IRCTC has been pivotal in modernising railway services in India, offering a variety of services, including online ticket booking and packaged drinking water under the brand ‘Rail Neer’.

As of 3rd July 2024, IRCTC has a market capitalisation of Rs. 80,528.00 cr., and a closing stock price of Rs. 1,002.95. The company’s price-to-earnings (PE) ratio stands at 72.48. Over the past five years, IRCTC has delivered an average return on investment (ROI) of 31.08%. It maintains a debt-to-equity ratio of 3.40. The company’s average net profit margin over the last five years is 25.66%.

NMDC Ltd

NMDC Ltd, established in 1958, is India’s largest iron ore producer and exporter, operating under the Ministry of Steel, Government of India. The company plays a crucial role in the supply of iron ore for the domestic steel industry.

NMDC’s current market capitalisation is Rs. 71,609.35 cr., with a stock price of Rs. 251.10. The company’s PE ratio is 12.84. Over the last five years, NMDC has achieved an average ROI of 24.48%. The company’s debt-to-equity ratio is 1.87, and its average net profit margin over the last five years is 31.43%. NMDC also offers a dividend yield of 2.97%.

Hindustan Aeronautics Ltd

Hindustan Aeronautics Ltd (HAL) was founded in 1940 and is a premier aerospace and defence company in India. HAL is involved in the design, development, manufacture, and maintenance of aircraft, helicopters, avionics, and aerospace structures.

As of the latest figures, HAL has a market capitalisation of Rs. 357,396.70 cr. and a closing stock price of Rs. 5,460.00. The company’s PE ratio stands at 46.90. Over the past five years, HAL has delivered an average ROI of 21.31%. The debt-to-equity ratio is 0.22, and the average net profit margin is 18.19%. HAL provides a dividend yield of 0.41%.

RITES Ltd

RITES Ltd, established in 1974, is a government-owned engineering consultancy company specialising in transport infrastructure. The company provides consultancy services in rail transport, infrastructure, and related technologies.

RITES Ltd has a market capitalisation of Rs. 16,829.54 cr. and a closing stock price of Rs. 698.00. The company’s PE ratio is 36.96. Over the past five years, RITES has achieved an average ROI of 19.98%. The debt-to-equity ratio is 0.20, and the average net profit margin over the last five years is 20.11%. The dividend yield stands at 2.57%.

Bharat Electronics Ltd

Founded in 1954, Bharat Electronics Ltd (BEL) is a state-owned company that designs, manufactures, and supplies advanced electronic products for the defence services. BEL’s product range includes radars, sonar, electronic warfare systems, and more.

BEL’s current market capitalisation is Rs. 2,23,752.33 cr., with a closing stock price of Rs. 314.40. The company’s PE ratio is 56.16. Over the last five years, BEL has delivered an average ROI of 19.75%. The debt-to-equity ratio stands at 0.44, and the average net profit margin over the past five years is 15.94%. BEL’s dividend yield is 0.95%.

Mazagon Dock Shipbuilders Ltd

Mazagon Dock Shipbuilders Ltd, established in 1934, is a premier shipbuilding yard in India. The company constructs warships and submarines for the Indian Navy and offshore platforms and associated support vessels for offshore oil drilling.

Mazagon Dock Shipbuilders has a market capitalisation of Rs. 87,322.69 cr. and a closing stock price of Rs. 4,690.00. The company’s PE ratio is 45.08. Over the past five years, it has achieved an average ROI of 17.69%. The debt-to-equity ratio is 0.13, and the average net profit margin over the last five years is 12.23%. The dividend yield stands at 0.35%.

Bharat Dynamics Ltd

Founded in 1970, Bharat Dynamics Ltd (BDL) is a manufacturer of ammunition and missile systems in India. BDL supplies products to the Indian Armed Forces and has a focus on research and development.

BDL’s current market capitalisation is Rs. 58,514.37 cr., with a closing stock price of Rs. 1,630.00. The company’s PE ratio is 95.50. Over the last five years, BDL has delivered an average ROI of 15.37%. The debt-to-equity ratio stands at 0.29, and the average net profit margin over the past five years is 16.48%. BDL’s dividend yield is 0.28%.

Engineers India Ltd

Engineers India Ltd (EIL), founded in 1965, provides engineering consultancy and EPC services principally focused on the oil, gas, and petrochemical industries.

EIL has a market capitalisation of Rs. 14,486.64 cr. and a closing stock price of Rs. 262.75. The company’s PE ratio is 32.54. Over the past five years, EIL has achieved an average ROI of 14.75%. The debt-to-equity ratio is 0.96, and the average net profit margin over the last five years is 9.36%. EIL’s dividend yield stands at 1.16%.

NBCC (India) Ltd

NBCC (India) Ltd, established in 1960, is a government-owned construction company that provides project management consultancy, engineering, procurement, and construction services.

NBCC’s current market capitalisation is Rs. 29,210.40 cr., with a closing stock price of Rs. 168.80. The company’s PE ratio is 72.74. Over the last five years, NBCC has delivered an average ROI of 13.29%. The debt-to-equity ratio stands at 0.02, and the average net profit margin over the past five years is 2.74%. NBCC’s dividend yield is 0.39%.

Cochin Shipyard Ltd

Cochin Shipyard Ltd (CSL), founded in 1972, is the largest shipbuilding and maintenance facility in India. CSL builds and repairs ships for the Indian Navy, the Indian Coast Guard, and commercial shipping companies.

Cochin Shipyard has a market capitalisation of Rs. 59,473.36 cr. and a closing stock price of Rs. 2,434.00. The company’s PE ratio is 75.93. Over the past five years, CSL has achieved an average ROI of 13.20%. The debt-to-equity ratio is 13.27, and the average net profit margin over the last five years is 16.84%.

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 are Public Sector Undertakings (PSU)?

Public Sector Undertakings, which is the full form of PSUs, are government-owned companies or corporations that operate in various sectors of the economy. These entities are established by the government to undertake commercial activities. Their goal is to provide essential goods and services to the public. Public sector stocks meaning refers to the shares of these government-owned companies that are available for trading in the stock market.

PSUs play a significant role in promoting economic growth, ensuring equitable resource distribution, and advancing government policies. They operate under the government’s control and can be involved in industries such as energy, telecommunications, finance, manufacturing, and more. 

Why Invest in PSU Stocks?

Now that we know what is PSU stocks, here are a few features of PSU Stocks that make them a potentially attractive investment for investors:

Stability and Reliability

Investing in PSU stocks or shares offers stability and reliability owing to their government ownership and support. The government’s backing provides a certain level of assurance, making them an attractive option, especially during times of market uncertainty.

Dividend Income

PSU stocks are attractive due to their consistent dividend distribution history. Many PSUs have a tradition of sharing a portion of their profits with investors, which provides a regular income stream and potentially enhances the overall returns on investment.

Long-Term Growth Potential

PSU stocks often provide gradual and sustainable long-term growth. This can be especially beneficial for investors prioritising a steady appreciation of their investments over time.

Economic Growth Catalyst

Investing in PSU stocks contributes directly to sectors critical for a country’s economic development. These government stocks can encompass a wide range of industries, including energy, telecommunications, infrastructure, and more, all of which play pivotal roles in driving economic progress.

Diversification Benefits

Diversification is a cornerstone of a well-balanced investment portfolio. By adding best performing PSU shares to your investment mix, you are diversifying your portfolio beyond privately-owned companies. This diversification can help mitigate risks associated with sector-specific downturns, providing a more resilient portfolio overall.

Government Support and Ownership

Government ownership lends an additional layer of stability to government stocks in India. It implies that these companies have the government’s support and backing, which can act as a stabilising force even in times of market turbulence. 

Resilience in Volatile Markets

Best public sector shares in India tend to weather market volatility relatively well. Government ownership, conservative management, and an essential service focus enhance their resilience to market turbulence.

The Categorisation of PSUs in India

Public Sector Undertakings (PSUs) in India are classified based on various criteria, reflecting their ownership, role, and strategic importance. 

Central Public Sector Enterprises (CPSEs)

CPSEs are PSUs owned and controlled by the Central Government of India. They are crucial to the country’s economic growth and development across diverse sectors. CPSEs can further be categorised into three groups:

• Maharatna: These are the most significant CPSEs with extensive operations and high profitability. They have greater financial autonomy, can make substantial investments, and take important decisions without government approval. For example, in May 2010, the Indian government granted Maharatna status to NTPC Ltd, established on November 7, 1975. NTPC operates from 70 locations in India, one in Sri Lanka and two in Bangladesh. 
• Navratna: These CPSEs also hold considerable operational and financial autonomy. They are profitable and have the flexibility to invest in strategic initiatives. For example, Container Corporation of India Limited (CONCOR), a Navratna PSU under the Indian Ministry of Railways, was established in March 1988 and began operations in November 1989 by acquiring seven inland container depots (ICDs) from Indian Railways as per the Companies Act.
• Miniratna: Miniratna CPSEs have a more modest level of autonomy. These low price government shares are further classified into Category-I and Category-II, with differing levels of operational independence. For example, the Airports Authority of India (AAI), a Miniratna Public Sector Unit (PSU), operates under the Ministry of Civil Aviation, Government of India. It plays a crucial role in developing, maintaining, and upgrading civil aviation infrastructure across the country. 

State Public Sector Enterprises (SPSEs)

SPSEs are PSUs owned and controlled by state governments. They operate at the state level and contribute to regional economic growth. SPSEs are present across various sectors, such as power, transport, and agriculture. For example, GRIDCO Limited, Odisha Hydro Power Corporation Limited and Odisha Power Transmission Corporation Limited, under the Odisha State Government.

Joint Ventures (JVs)

JVs are collaborations between public and private sector entities, often with the government holding a significant stake. Such partnerships harness both sectors’ strengths for shared goals like infrastructure development or resource extraction. For example, a Public-Private Partnership (PPP) involves collaboration between a government or statutory entity and the private sector to deliver public assets or services. The private sector contributes through investments or management responsibilities.

PSU Bank Stocks

PSU bank stocks refer to Public Sector Undertaking (PSU) banks in India. The government owns and operates these banks, playing a crucial role in the country’s financial sector.

How to Invest in PSU Stocks?

Investing in best Indian government stocks can be a lucrative opportunity for those seeking stability and long-term portfolio growth. With the government’s backing and often serving essential sectors of the economy, PSU stocks offer a unique investment avenue. Here’s a detailed guide on how you can invest in PSU stocks effectively:

Open a Trading or Demat Account

The first step towards investing in PSU stocks is to open a trading or Demat account with a reputable brokerage firm. This account will be your gateway to the stock market, allowing you to buy and sell securities, including PSU stocks. Ensure that you choose a brokerage that offers competitive fees, reliable customer service, and a user-friendly trading platform.

Research Lists of PSU Stocks

Conduct thorough research to identify potential PSU stocks that align with your investment goals and risk tolerance. You can utilise online tools such as  Tickertape Stock Screener to explore different lists of PSU stocks based on various criteria such as market capitalisation, dividend yield, and financial ratios. Narrow your options to a select few with strong fundamentals and growth prospects.

Check Stock for Proper Credentials

Verifying the credentials of any PSU stock is essential before you invest. Ensure the stock is listed on reputable stock exchanges such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Additionally, confirm that the company is registered with regulatory authorities like the Securities and Exchange Board of India (SEBI) to safeguard your investments against potential fraud or malpractice.

Place an Order

Once you’ve identified a promising PSU stock and conducted due diligence, it’s time to place an order. Log in to your trading platform and enter the relevant details such as the stock symbol, quantity, and order type (market or limit order). Consider current market conditions, price trends, and your investment horizon before executing the trade. Review your order carefully before confirming to avoid any errors.

Monitor Your Investments

After investing in PSU stocks, it’s crucial to monitor your portfolio regularly to track performance and make informed decisions. Keep abreast of market developments, company news, and economic trends that may impact the performance of your investments. You may consider setting up alerts or notifications on your trading platform to stay informed about any significant changes or events related to your holdings.

How to Choose the Best PSU Stocks to Invest in?

When you are choosing the best PSU stocks to invest in, it might be helpful to explore various avenues to make informed decisions. Here are some steps you could consider:

Peer Comparison

You can compare the performance of PSU stocks with their industry peers to identify relative strengths and weaknesses. This comparison may help you understand how a particular PSU stock stands in relation to its competitors.

Sector Analysis

Conducting in-depth research on specific sectors within the PSU domain can help you identify promising investment opportunities. You can look into sector-specific dynamics to gauge which sectors might offer the best growth prospects.

Government Policies

Analysing government policies and initiatives that directly impact PSU sectors can be beneficial. Understanding these policies may help you anticipate the future growth trajectory of PSU stocks, as government actions often influence these sectors significantly.

Historical Performance

Evaluating the historical performance of low price PSU stocks, including revenue growth, profitability, and stock price trends, can provide insights into their long-term potential. Historical data might help you assess how these stocks have performed over time and what their future performance might look like.

Market Sentiment

Considering market sentiment and investor sentiment towards government-owned companies in India can be essential. You can monitor news, analyst reports, and market trends to understand how the market views these stocks. Market sentiment can often influence stock prices and your investment decisions.

Risk Assessment

You might assess the risks associated with investing in PSU stocks, including regulatory risks, political risks, and macroeconomic factors. Understanding these risks can help you make more informed investment decisions.

What are the Factors to Consider Before Investing in PSU Stocks?

When you are investing in the best Indian government stocks, several factors might be important to consider to make informed decisions. Here are some crucial aspects you could evaluate:

Financial Performance

You can assess the PSU’s financial health by looking at revenue growth, profit margins, and debt levels. A track record of consistent profitability may indicate stability and future growth potential.

Government Policies

Understanding how government policies and regulations impact the PSU’s operations is essential. Changes in policies can influence stock performance, especially during times of political instability. For example, government ownership or decision-making may be affected by policy shifts. Checking the Indian government share list and government share prices can provide valuable insights.

Market Position

Evaluating the PSU’s market share, competitive advantage, and growth prospects in its sector might help you gain an in-depth understanding of the investment. This analysis can reveal the company’s strengths and potential for future success.

Management Quality

You can analyse the management team’s experience, strategies, and transparency in decision-making. Effective and transparent management may contribute to the PSU’s long-term success and stability.

Risk Tolerance

Understanding your risk tolerance and investment horizon is crucial before committing to PSU stocks. Different PSUs come with varying levels of risk, and aligning your investments with your risk tolerance may help you achieve your financial goals.

Valuation

Assessing the stock’s valuation compared to its earnings, book value, and industry peers can provide an idea of whether you’re making a profitable investment. This evaluation might help you determine if the stock is undervalued or overvalued.

What Are the Risks of Investing in PSU Stocks?

When you are considering investing in PSU stocks, it might be helpful to be aware of several potential risks. Here are some key factors you could consider:

Bureaucracy and Inefficiency

PSUs’ bureaucratic nature often leads to sluggish decision-making, which can impede their ability to adapt to market shifts and drive innovation swiftly. This inefficiency may affect the overall performance of PSU companies in India.

Earnings Volatility

Many PSUs operate in cyclical industries like commodities, leading to fluctuating earnings during economic downturns. This volatility might make it challenging to predict the financial performance of top PSU stocks in India.

Market Reaction to Disinvestment

A government stake sale in a PSU can create market uncertainty and impact the stock’s performance. The market reaction to such disinvestment may affect the price and stability of the best PSU stocks for 2024.

Dividend Surprise

While PSUs often offer dividends, the consistency of these payouts can be uncertain. The government’s dividend distribution policy and the company’s financial performance might influence the dividend amounts and frequency, even for the best dividend stocks.

Government Interference

Government-owned PSU stocks can encounter political and bureaucratic influences. These influences might not always align with investors’ interests, and changes in policies or leadership may impact their operations and market performance.

Market Performance

Certain Indian PSUs might underperform compared to private companies due to inefficiencies, outdated technologies, or a lack of strategic focus. This could affect the competitiveness of the top PSU stocks in India.

Low Trading Liquidity

Certain public sector stocks could have low trading volumes, causing liquidity problems. This might impact the ease of buying or selling shares, making it harder to manage investments in PSU stocks.

Limited Focus on Shareholder Value

Government priorities can expand beyond shareholder value, impacting investment decisions, dividends, and mergers. This limited focus on shareholder interests might affect the attractiveness of PSU company investments.

To Wrap It Up…

Investing in PSU stocks involves unique risks and considerations, including bureaucratic inefficiencies, earnings volatility, and government interference. To navigate these complexities, you might conduct thorough research on the financial health, market position, and management quality of PSUs. Staying informed about government policies and market sentiment can also provide valuable insights. By understanding these challenges and opportunities, you may make more informed decisions that align with your investment goals and risk tolerance, potentially enhancing your chances of a favourable investment outcome in the top PSU stocks in India.

Frequently Asked Questions on PSU Stocks