Public Sector Undertakings (PSUs) have always played a key role in India’s economy, providing important services and contributing to overall growth.
Recently, many of these PSUs are starting to show strong growth potential, moving beyond their traditional slow-paced image.
With new reforms, better management, and a focus on modernization, some PSU stocks are becoming attractive investment options.
Considering this, we applied a screener to identify the top PSU stocks which delivered sales and net profit compounded average growth rate (CAGR) of more than 15% over the last 5 years, had debt to equity ratio of less than 1 as of 31 March 2024, and which show promising prospects for the future.
Additionally, the below mentioned PSUs have been arranged in terms of the highest to lowest 5 years net sales CAGR.
These are not stock recommendations. Investors should do their own research and do due diligence before considering any investment in the stock market.
Also, investors should pay close attention to corporate governance while performing their due diligence.
#1 Garden Reach Shipbuilders & Engineers (GRSE)
First on this list is GRSE.
Garden Reach Shipbuilders & Engineers is a premier shipbuilding company in India under the administrative control of the Ministry of Defence, primarily catering to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard.
The company’s revenue has grown at a CAGR of 21% in the last five years while its net profit has grown at a CAGR of 26.6%.
The company’s five-year average return on equity (RoE) and return on capital employed (RoCE) were 17.2% and 22.7%, respectively.
As of 31 March 2024, the company is net-debt free.
As of Q3 FY25, the order book stands at Rs 238.8 billion (bn), comprising 40 platforms across 10 projects.
Going forward, the management maintains a positive outlook, projecting a CAGR of 20-25% over the next five years.
Currently, 4% of the order book is from exports, with expectations to quadruple this figure in the next four years.
Additionally, the management is optimistic about the future, driven by a robust order book, government support, and strategic initiatives to enhance capacity and capabilities.
#2 Indian Railway Catering and Tourism Corporation (IRCTC)
Second on this list is IRCTC.
IRCTC is a mini-Ratna (Category 1, Central Public Sector Enterprises) and the only company authorized by the Indian government to provide online railway tickets, catering services, and packaged drinking water at railway stations and trains in India.
Coming to the financials, the company’s revenue has grown at a CAGR of 18% in the last five years while its net profit has grown at a CAGR of 29.2%.
The company’s five-year average RoE and RoCE were 36.3% and 50.2%, respectively.
As of 31 March 2024, the company is net-debt free.
The company’s Q3 FY25 revenue reached an all-time high of Rs 12.3 bn, a growth of approximately 10% year-on-year (YoY).
IRCTC is exploring non-conventional income sources beyond the convenience fee in the internet ticketing segment due to market saturation.
The E-Catering segment has shown significant growth, with meals served increasing from an average of 2,000 per day to over 102,000 meals per day.
Going forward, the management is confident about the growth trajectory, particularly in the tourism segment driven by luxury train offerings, Bharat Gaurav train initiative and increased demand for travel.
#3 Rail Vikas Nigam Ltd (RVNL)
Next on this list is RVNL.
Rail Vikas Nigam was incorporated by the government of India.
It is engaged in the business of implementing various types of rail infrastructure projects assigned by Ministry of Railway (MoR).
These include doubling, gauge conversion, new lines, railway electrification, major bridges, workshops, production units and sharing of freight revenue with railways as per the concession agreement entered with MoR.
The company’s revenue has grown at a CAGR of 16.7% in the last five years while its net profit has grown at a CAGR of 19.3%.
The company’s five-year average RoE and RoCE were 20.2% and 16.6%, respectively.
Its debt to equity ratio was 0.7 as of 31 March 2024.
RVNL’s current order book stands at Rs 970 bn, with Rs 490 bn from bidding works and Rs 476 bn from railway works. The management indicates a transition from government-assigned projects to market-driven bidding.
The management has given the revenue guidance for FY25 at Rs 210 bn, out of which Rs 130 bn was achieved in 9M FY25, indicating an achievable target of Rs 80 bn in Q4.
Going forward, the company anticipates turnover for the coming years projected at Rs 280-300 bn annually, with a gestation period of 3 to 4 years for project execution.
The management expressed confidence in maintaining margins despite competitive pressures, leveraging operational efficiency and project execution capabilities.
#4 Mazagon Dock Shipbuilders Ltd (MDL)
Fourth is MDL.
MDL is among India’s leading shipbuilding yards, specializing in constructing and repairing warships and submarines for the Ministry of Defence and commercial vessels.
It is the only Indian shipyard to have built destroyers and conventional submarines for the Navy.
The company’s revenue has grown at a CAGR of 15.5% in the last five years while its net profit has grown at a CAGR of 29%.
The company’s five-year average RoE and RoCE were 23.6% and 33.3%, respectively.
As of 31 March 2024, the company is net-debt free.
MDL’s order book stands at Rs 347.9 bn, as of Q3 FY25.
The company has a comprehensive capex program of Rs 50 bn, planned over the next 4-5 years. The initial capex for FY26 is expected to be approximately Rs 5 bn.
Additionally, the management maintains optimism regarding future growth, citing no expected decline in revenues.
It also projects sustainable margins of 12-15% at profit before tax (PBT) level, reflecting industry standards.
#5 Gujarat Gas Ltd (GGL)
Last on this list is Gujarat Gas.
GGL is a government company. It is engaged in the business of natural gas in India, which involves distribution of gas from sources of supply to centres of demand and to end customers.
GGL caters to its customers by providing CNG and PNG connections in domestic, industrial, commercial and non-commercial segments in the areas of south & central Gujarat and Saurashtra.
The company is a part of Gujarat State Petronet Ltd (GSPL) (holding 54% stake) which has a strong presence in the natural gas value chain.
Coming to the financials, the company’s revenue has grown at a CAGR of 15.1% in the last five years while its net profit has grown at a CAGR of 22.3%.
The company’s five-year average RoE and RoCE were 28.3% and 29.7%, respectively.
As of 31 March 2024, the company is net-debt free.
The management expects natural gas prices to remain high in Q4 FY25 due to geopolitical factors, potentially affecting competitiveness against alternate fuels.
GGL is focusing on expanding its customer base, with over 2.23 million domestic customers added during Q3 FY25.
The company is also signing agreements under the FDODO (Franchisee Dealer Owned Dealer Operated) model, having already signed more than 50 dealer agreements.
The planned capital expenditure for FY26 is projected at around Rs 10 bn, with ongoing investments in infrastructure.
The management is actively seeking to replace expiring contracts and is in negotiations for long-term agreements to ensure stable gas sourcing.
Overall, GGL is positioned to maintain growth through strategic investments and infrastructure expansion while navigating challenges in sourcing and pricing dynamics. The management remains confident in the company’s ability to adapt and grow in a competitive landscape.
Conclusion
Indian PSU stocks are no longer just stable, dividend-paying options—they are evolving into high-growth opportunities with strong future potential.
With government reforms, strategic investments, and improving efficiency, many PSUs are well-positioned to create substantial value for investors.
While risks remain, careful selection of promising PSU stocks can offer a balanced mix of stability and growth.
Additionally, conducting due diligence on these companies and including corporate governance as a key criterion in your selection process, is essential.
At the same time, assess your financial goals, risk tolerance, and investment horizons before making investment decisions.
As India’s economy continues to expand, these stocks could play a crucial role in wealth creation for long-term investors.
Now is the time to take a closer look at Indian PSUs and unlock the value they have to offer.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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