In a remarkable turn of events, India’s Public Sector Enterprises (PSUs) have embarked on an unprecedented rally, propelling their collective market capitalization to a level unseen since August 2019. Recent data from Bloomberg has unveiled that these state-run entities now command a substantial 13.3 percent share of the equity market capitalization, amounting to a staggering Rs 42 lakh crore.
Over the past quadrennium, PSUs have demonstrated remarkable growth, witnessing a remarkable increase of Rs 23 lakh crore in their collective market capitalization, now standing at a colossal Rs 42 lakh crore. The driving forces behind this surge are exemplified by the extraordinary performance of four prominent companies: State Bank of India (SBI), Life Insurance Corporation (LIC), NTPC, and Hindustan Aeronautics, which have jointly contributed to one-third of these impressive gains. Concurrently, the amalgamated market capitalization of all companies listed on the Bombay Stock Exchange (BSE) has more than doubled, reaching a staggering Rs 317 lakh crore.
At the forefront of this remarkable resurgence, the State Bank of India commands the highest market capitalization among the PSUs, closely followed by LIC, which boasts a substantial Rs 4.2 lakh crore. These two financial giants, along with ONGC and NTPC, collectively constitute one-third of the entire PSU market capitalization.
This revitalization isn’t solely attributed to surging stock prices but also to an influx of companies going public. Among these PSUs, notable entities like LIC and SBI Cards, both of which rank among India’s three largest IPOs, along with IRCTC, IRFC, Mazagon Dock, Railtel, and others, have taken the leap into the public domain. These companies, when combined, exhibit a market capitalization exceeding Rs 7 lakh crore, which constitutes an impressive 16.5 percent of the overall PSU market capitalization.
Despite the lackluster performance of PSUs over the years, they are now experiencing a resurgence in investor interest. For instance, Bharat Heavy Electricals Limited (BHEL) stands as a prime example, having surged to levels last witnessed in 2015, though still trading significantly below its peak of Rs 390 in 2007. A similar scenario unfolds with stocks like Coal India, which have lingered around their IPO price for a decade.
Nonetheless, ICICI Securities opines that the recent surge in certain PSU stocks signals a potential breakout for them. The firm notes, “The PSU theme is outperforming since the beginning of CY23, and many companies that have underperformed for several years have started coming out of large consolidation patterns with significant growth potential ahead.”
In a landscape where PSUs have been dormant for a considerable duration, this resurgence is indeed a promising sign, offering potential investors renewed hope and prospects for growth in the Indian market.
