What is the beginning of a PSU party? Where to discover the front leg of growth

India’s public sector undertakes (PSUs) emerged as an attractive turnaround story in the next era. Supported by structural reforms, policy televinds and sensible capital allocation, PSUS delivered 36% PAT CAGR of the stars on FY 20-25-which runs a strong re-rating on the board with regard to 26% CAGR in the private sector. The BSE PSU index posted 32% CAGR in the same period, leading by strength in BFSI, capital goods and utilities.

FY22 marks the phase of earnings consolidation, a high base effect in PSU’s profit and weak oil and gas (O&G) sector. Except for O&G, PSU’s earnings increased to 16% yu. PSU banks remained a dominant driver, with 26% U -profit increase by low credit costs and the quality of improved assets. Notably, India Inc. PSUS has increased to 37.5% in the financial year 25 – from 20% in FY 20 – highlights their extensive relevance to India’s corporate earnings landscape.

Valuation Multiples posted the FY 24 Peak central, with BSE PSU index trading on 11.7x forward P/E in June 2025 – below 13.8x in July 2024 but above the 9.9x history of the Historical Average. The ROE of this sector is strong at 16%, and the contribution of PSUs to total profit-making PSUs has only 1%, which is below 45%in the financial year 18-amended operational discipline in Signaling.

Going forward, PSU’s earnings are expected to rise at 10%CAGR than the fiscal year 25-227, led by BFSI (53%of additional profits), O&G (20%), and metals (12%). The latest government capex, Make-in-India Momentum and strong order flow in defense and infrastructure remain key televinds.

Bell: Target Rs. 410

India Electronics (BL) is ready for strong growth, supported by 270 billion order pipelines and strong tailwinds from defense indigenous. The company is expected to grow 15% revenue in FY 26, under the leadership of large orders, such as QRSAM and Next-General Corwets, by ensuring the visibility of healthy income by FY 27.

Continuous R&D investments, enhanced localization and strong, with a strong, Debt -free balance sheet with 94 billion, enables space to expand margin elasticity and capacity. We expect 17%/16%/19%income/PT/EPS CAGR at FY 25-227.

The PSU market was also one of the top five gainers in the PSU Market Cape Ranking in FY 25, which reflects investors’ guilt in the PSU growth theme of capital goods.

HAL: Target Rs. 5,650

Hale posted an elastic FY 25 with 10% yo stomach growth, supported by improved margins and normalization of provisions. Despite the Rs SERV Chit 8-10% income growth guidance, HAL’s strong INR 1.8 trillion order book and Tejas MK1A Aircraft Supply Issues Resolution for Aircraft Support Execution Momentum. The company aims to deliver 12 LCA aircraft in FY 26.

We modeling 21%/14%income/stomach CAGR at FY 25-227, stable EBITDA margins (~ 29%), supported by strong cash flow and managable capex. In June 25, the Market Cap also went to the 3G spot in PSU, in which the regional leadership and the interests of the constant investors have been published.

(Author Head – Research, Property Management, Motilal Oswal Financial Services Limited)

(Disclaimer: The views given by recommendations, suggestions, opinions and experts are their own. This does not represent the views of the economic time)