FY25 marked a section of earnings consolidation, with PSU income declining 2% YoY on account of a excessive base impact and weak oil & fuel (O&G) sector efficiency. Excluding O&G, PSU earnings grew 16% YoY. PSU banks remained the dominant driver, with a 26% YoY revenue improve pushed by decrease credit score prices and improved asset high quality. Notably, PSUs’ share in India Inc.’s whole revenue pool rose to 37.5% in FY25—up from 20% in FY20—highlighting their increasing relevance in India’s company earnings panorama.
Valuation multiples have moderated submit the FY24 peak, with the BSE PSU Index buying and selling at 11.7x ahead P/E in June 2025—down from 13.8x in July 2024 however above the historic common of 9.9x. The sector’s ROE stays sturdy at 16%, and the contribution of loss-making PSUs to whole income has dropped to only 1%, down from 45% in FY18—signaling improved operational self-discipline.
Going ahead, PSU earnings are anticipated to develop at a ten% CAGR over FY25–27, led by BFSI (53% of incremental revenue), O&G (20%), and metals (12%). Renewed authorities capex, Make-in-India momentum, and robust order flows in defence and infrastructure stay key tailwinds.
BEL: Goal Rs 410
Bharat Electronics (BEL) is poised for sturdy progress, backed by a sturdy INR 270 billion order pipeline and robust tailwinds from defence indigenization. The corporate expects 15% income progress in FY26, led by the execution of huge orders equivalent to QRSAM and next-gen corvettes, guaranteeing wholesome income visibility via FY27.
Constant R&D investments, enhanced localization, and a robust, debt-free stability sheet with INR 94 billion in money allow margin resilience and room for capability growth. We count on income/PAT/EPS CAGR of 17%/16%/19% over FY25–27.BEL was additionally among the many prime 5 gainers in PSU market cap rankings in FY25, reflecting investor conviction within the capital goods-led PSU progress theme.
HAL: Goal Rs 5,650
HAL posted a resilient FY25 with 10% YoY PAT progress, supported by improved margins and normalization of provisions. Regardless of conservative 8–10% income progress steering, HAL’s strong INR 1.8 trillion order ebook and backbone of engine provide points for Tejas Mk1A plane assist execution momentum. The corporate goals to ship 12 LCA plane in FY26.
We mannequin a income/PAT CAGR of 21%/14% over FY25–27, supported by steady EBITDA margins (~29%), sturdy money flows, and manageable capex. HAL has additionally climbed to the third spot amongst PSUs by market cap in Jun’25, highlighting sectoral management and sustained investor curiosity.
(The creator is Head – Analysis, Wealth Administration, Motilal Oswal Monetary Companies Ltd)
(Disclaimer: Suggestions, options, views, and opinions given by consultants are their very own. These don’t symbolize the views of The Financial Instances)
