Public Sector Undertakings (PSUs) have long been integral to India’s economic framework, delivering essential services and bolstering national development. However, recent trends indicate a significant shift as several PSUs demonstrate remarkable growth potential, shedding their previously slow-paced reputations. Thanks to innovative reforms, enhanced management practices, and a commitment to modernization, certain PSU stocks are emerging as appealing investment choices.

Identifying High-Growth PSU Stocks

In light of these developments, we utilized a stock screener to pinpoint leading PSU stocks that have achieved impressive compounded annual growth rates (CAGR) in both sales and net profit exceeding 15% over the past five years. Additionally, we focused on companies with a debt-to-equity ratio of less than 1, as of March 31, 2024, and those that exhibit promising future prospects.

The following PSUs are ranked based on their five-year net sales CAGR, showcasing their growth trajectories and investment viability.

Note: The stocks listed below are not investment recommendations. It’s crucial for investors to conduct their own research and due diligence before making any investment decisions.

1. Garden Reach Shipbuilders & Engineers (GRSE)

Kicking off our list is Garden Reach Shipbuilders & Engineers (GRSE), a leading shipbuilding entity under the Ministry of Defence. This company primarily fulfills the shipbuilding needs of the Indian Navy and the Indian Coast Guard.

• Financial Performance: GRSE’s revenue surged with a CAGR of 21% over the last five years, while net profit skyrocketed with a CAGR of 26.6%.
• Return Ratios: The five-year average return on equity (RoE) and return on capital employed (RoCE) stood at 17.2% and 22.7%, respectively.
• Current Status: As of March 31, 2024, GRSE is net-debt free with an order book totaling Rs 238.8 billion across ten projects.
• Future Outlook: Management anticipates a CAGR of 20-25% over the next five years, backed by a solid order pipeline and strategic growth initiatives.

2. Indian Railway Catering and Tourism Corporation (IRCTC)

Next on our list is the Indian Railway Catering and Tourism Corporation (IRCTC), a mini-Ratna enterprise recognized as the sole entity authorized by the Indian government to facilitate online railway ticketing, catering services, and packaged drinking water services in trains and stations.

• Financial Highlights: Over the past five years, IRCTC reported revenue growth at a CAGR of 18% and an exceptional net profit CAGR of 29.2%.
• Return Metrics: The average RoE and RoCE for the last five years were 36.3% and 50.2%, respectively.
• Debt Position: As of March 31, 2024, the company holds a net-debt free status.
• Growth Prospects: IRCTC is diversifying income streams beyond ticketing fees and is witnessing substantial growth in its e-catering segment, serving over 102,000 meals daily.

3. Rail Vikas Nigam Ltd (RVNL)

Rail Vikas Nigam Ltd (RVNL), established by the Indian government, focuses on implementing various rail infrastructure projects as directed by the Ministry of Railways.

• Financial Growth: RVNL has achieved a revenue CAGR of 16.7% and a net profit CAGR of 19.3% over the past five years.
• Return Indicators: The five-year average RoE and RoCE were 20.2% and 16.6%, respectively.
• Debt Status: As of March 31, 2024, RVNL’s debt-to-equity ratio was 0.7.
• Future Guidance: The company anticipates a revenue target of Rs 210 billion for FY25, with ambitious projections for future years.

4. Mazagon Dock Shipbuilders Ltd (MDL)

Mazagon Dock Shipbuilders Ltd (MDL) stands as one of India’s foremost shipyards, specializing in the construction and repair of naval vessels and submarines for the Ministry of Defence.

• Financial Performance: MDL’s revenue has expanded with a CAGR of 15.5%, while net profit has surged with a CAGR of 29%.
• Return Metrics: The average RoE and RoCE over the last five years were 23.6% and 33.3%, respectively.
• Debt Position: As of March 31, 2024, MDL is also net-debt free.
• Future Prospects: The company is optimistic about its growth trajectory, supported by a robust order book of Rs 347.9 billion.

5. Gujarat Gas Ltd (GGL)

Rounding out our list is Gujarat Gas Ltd (GGL), a government entity involved in the distribution of natural gas across various sectors in India, including domestic, industrial, and commercial markets.

• Financial Growth: GGL achieved a revenue CAGR of 15.1% over the past five years, with net profit growing at a CAGR of 22.3%.
• Return Ratios: The five-year average RoE and RoCE were 28.3% and 29.7%, respectively.
• Debt Status: The company is net-debt free as of March 31, 2024.
• Expansion Plans: GGL is focusing on customer expansion, adding over 2.23 million domestic customers in Q3 FY25, while also planning significant capital expenditures.

Conclusion

Indian PSU stocks are evolving from traditional, stable investments into dynamic entities with high growth potential. With strategic reforms and advancements, many PSUs are positioned to offer substantial value to investors. While risks persist, diligently selecting promising PSU stocks can yield a healthy balance of stability and growth.

Investors should remain vigilant, considering corporate governance and operational effectiveness in their evaluations. As India’s economy continues its upward trajectory, these PSU stocks may provide significant wealth-building opportunities for long-term investors.

Happy Investing!

Disclaimer: This article serves informational purposes only and is not a stock recommendation. Always consult with financial advisors before making investment decisions.