Market cap share of state-run firms at four-year high

As of 31 March, the PSU stocks’ share in the total market capitalization reclaimed the 11% mark, the first time it ended a fiscal year at that level since 31 March 2019. The current level marks a significant rise since a year ago when the share was 9.9%.

“The government initiative towards clean-up of debt from PSU balance sheets, focus towards indigenous production in defence, towards localization, have led to improvement in PSUs,” said Arvinder Singh Nanda, senior vice president, Master Capital Services, a listed financial services provider. “Undervaluation and attractive dividend yields have also led to increased market capitalization of PSUs.”

Still, the PSUs’ share remains far from its peak value of around 32% more than a decade ago.

Equity markets have had a topsy-turvy ride this year, with year-to-date gains of 6.8% in the 30-share Sensex. In the same period, the overall market capitalization of the stocks covered in the analysis has grown nearly 12%, but the combined valuation of 70 PSU stocks has risen 13.8%.

In the past year, the Sensex has delivered an 8.9% return, while the BSE PSU index has outperformed the blue-chip stocks with a 25.8% gain.

Interestingly, around 46% of the gain in the PSU market capitalization in the last year has come from PSU banks. “Indian PSU banks have worked towards significantly bringing down their gross NPA since 2017-18, which has led to the improvement in profitability of PSUs, constituting one-third of the profit pool of Indian PSUs,” Nanda added.

Altogether, 13% of the PSU stocks saw their valuations double in the past year, and 59% saw double-digit gains. Only a handful (17%) failed to make any gains. (The rest grew in single digits.)

Among banks, all posted healthy growth, and some, such as UCO Bank and Union Bank of India, saw a sharp rise in their market value.

Updated: 02 Sep 2023, 09:10 AM IST