Best PSU Stocks to Buy in India in 2024

Public Sector Undertakings, or PSUs, are companies in which the government of India holds a majority stake of more than 50%. Investors often prefer PSUs due to their strategic importance to the nation, stable business models, and lower overall risk. 

If you are a conservative investor focused on generating passive income over the long term, you could consider investing in stocks from the best PSU stocks to buy list. Let us quickly get a glimpse of the top public sector undertakings along with the industry they operate in and their current market price.  

Best PSU Stocks to Buy in India 2024

Top PSU Stocks to Buy in India 2024

• State Bank Of India

As India’s largest public sector banking institution, the State Bank of India (SBI) is one of the best PSU stocks to buy for the long term. In addition to retail and corporate banking, SBI also offers investment banking, insurance, and wealth management services through its various subsidiaries.

The bank’s consistent revenue and profit-generating ability combined with its good dividend yield of 1.74 makes it one of the best PSU stocks for dividends. Although the debt-to-equity ratio is high at 11.16, it is among the lowest with respect to banking PSU stocks.   

• NTPC Ltd.

The National Thermal Power Corporation (NTPC) is in the power generation and distribution business and has contributed immensely to India’s energy security. Established in 1975, the entity currently has 93 power stations (including joint ventures) and a total installed capacity of 76,475.68 MW.

Despite operating in a capital-intensive industry, NTPC’s debt-equity ratio is just 1.18, making it one of the best PSU stocks to buy. Passive investors looking for the best PSU stocks for dividends that provide long-term returns can consider investing in NTPC Ltd.   

• Bharat Petroleum Corporation Ltd.

Among India's leading integrated oil and gas companies and the best PSU stocks to buy is the Bharat Petroleum Corporation Ltd. (BPCL). The company’s nationwide network and extensive infrastructure combined with its expansive product portfolio have helped it deliver consistent profit growth of 28% CAGR over the past 5 years. 

The return on equity (ROE) of 39.94% is the highest among public-sector refineries, which is another positive factor. Furthermore, Bharat Petroleum Corporation’s dividend yield of 9.75, places it firmly at the top of the list of best PSU stocks for dividends.  

• Hindustan Aeronautics Ltd.

One of the best PSU stocks to buy to get exposure to the growing domestic defence industry, Hindustan Aeronautics Ltd. (HAL) is India's premier aerospace and defense company. HAL's product portfolio includes the Tejas Light Combat Aircraft, Advanced Light Helicopter Dhruv, and other civil aviation aircraft.

Over the past 5-year period, the company’s profits have been growing at 27% CAGR. This combined with a high operating profit margin of 31.26% suggests that HAL’s fundamentals are quite strong. Hindustan Aeronautics Ltd. is one of the few public sector undertakings in the country with a debt-equity ratio of zero.  

• Coal India Ltd.  

Established in 1975, Coal India Ltd. is another entity in the best PSU stocks to buy list. Currently, the company is the largest producer of coal in the world. Coal India along with its various subsidiaries own 352 mines across 84 mining areas in 8 states with a total annual capacity of 625.91 Metric Tonnes.  

The company has the highest return on equity (ROE) of 51.46 and the third-highest dividend yield of 5.38 among all public sector undertakings. This makes Coal India Ltd. one of the best PSU stocks for dividends.       

Categories of PSUs in India 2024

Before shortlisting the best PSU stocks to buy, you must first be aware of the various categories of public sector undertakings. Here is a quick overview of the four major types of PSUs.    

• Central Public Sector Enterprises (CPSEs)

Central Public Sector Enterprises (CPSEs) are companies that are owned and controlled by the government of India. Some examples of the best PSU stocks to buy in this category are NTPC Ltd. and GAIL (India) Ltd.

• State Public Sector Enterprises (SPSEs)

Companies that are owned and controlled by the respective state governments of India are referred to as State Public Sector Enterprises (SPSEs). State road transport corporations and state power distribution companies are some examples of PSUs in this category.  

• Joint Ventures (JVs)

Joint ventures (JVs) are entities that are formed through public-private collaborations. Here, the government shares the ownership with private entities. Some examples of JVs include ONGC Mittal Energy Limited (OMEL) and IndianOil Panipat Power Consortium Limited. 

• Banking PSUs 

Banking PSUs are public sector banking institutions that are owned and controlled by the government of India. Some examples of banking PSU stocks include State Bank of India, Bank of Baroda, and Punjab National Bank. Here is a table outlining some of the banking PSU stocks and their key fundamentals.

How to Analyse a PSU Stock?

With so many public sector undertakings, how do you determine the best PSU stocks to buy? Here is a quick guide that can help you analyse a public sector undertaking to determine its investability. 

• Examine its Financial Performance 

The financial health is often the first factor you must examine to identify best PSU stocks to buy. When examining financial performance, focus on key metrics like revenue growth, profit margins, debt-equity, and return on equity over the past 5 years. If you wish to invest in the best PSU stocks for dividends, remember to analyse dividend yield and the payout history.

• Compare it With its Peers

Benchmarking an entity’s performance against its public and private sector peers can help you unearth the best PSU stocks to buy. Compare metrics like P/E ratio, P/B ratio, operating margins, market share, and revenue growth rate to understand the company’s position in the sector or industry.       

• Conduct Sectoral and Industry Analysis

Evaluating the growth prospects and challenges facing the sector in which the entity operates is important to determine the best PSU stocks to buy. Remember to examine the impact of technological changes, regulatory environment, and global trends on the industry and the company’s ability to adapt to changing conditions. 

Model Portfolio

If you have limited capital, you may be searching for the best PSU stocks under Rs. 50 or even Rs. 10. This may be futile because most PSUs have higher share prices. A better approach would be to create a small yet concentrated portfolio of the best PSU stocks to buy over the long term. Here is one such basket of stocks. 

To create this portfolio of the best PSU stocks to buy in India, you need capital worth around Rs. 35,853.55 as on :

Detailed Overview of the Best PSU Stocks to Buy Now in India 2024

Want to know more about the best PSU stocks to buy over the long term? In that case, you need to look beyond the market price alone and evaluate various parameters like revenue and profit growth, market cap and financial ratios. In the table below, you’ll find insights into the P/E ratios, P/B ratios, ROE, ROCE and dividend yields of the best PSU stocks to buy in India 2024.