Public sector companies ride Aatmanirbhar wave to D-Street stardom
government’s policies to promote domestic manufacturing and create an ecosystem for indigenous defence procurement as well as green energy have helped energise shares of public sector undertakings (PSUs). A rush to own PSU stocks that have reported earnings growth above the benchmark index growth has resulted in their rerating.
The share of government-owned companies in India’s total market capitalisation rose to nearly 10% in November from a low of 5% in 2020.
The market value of PSUs in the BSE 200 index touched a 12-year high of $272 billion (Rs 22.6 lakh crore) at the end of September.
The Nifty PSU index has a dividend yield of 4.1% compared with 1.4% for the Nifty 50 index. This makes the stocks attractive for dividend-seeking investors as well.
Among PSUs, defence-related plays are safer picks over a long-term horizon of over five years since the government is the major customer and its ambition is to reduce imports.
The per for mance of Hindustan Aeronautics (HAL) on the bourses since listing in March 2018 shows how government policies can transform a PSU’s outlook. HAL’s IPO was just about subscribed in contrast to those of private sector companies that were oversubscribed.
In the last three years, the government’s thrust on indigenisation of defence procurement increased its order flow even as the company became debtfree.
Foreign portfolio investors purchased the stock in big numbers, lifting their ownership in the company to 12% at the end of September from 1% in FY21. PSUs such as Mazagon Dock, Garden Reach Shipbuilders and Cochin Shipyard have also caught investor attention as the Indian Navy expands its fleet to meet challenges emerging from China’s presence in the Indian Ocean and the Malacca Strait.
