How Have Indian PSUs Become Wealth Creators with a Market Cap Growth of Rs 57 Lakh Crore in Just 5 Years?

New Delhi, June 26 (NationPress) The market capitalisation of Indian public sector units (PSUs) has seen a remarkable rise, soaring from Rs 12 lakh crore in March 2020 to an impressive Rs 69 lakh crore by June 2025. This translates to an addition of Rs 57 lakh crore over a span of just five financial years, as reported on Thursday.

During the period from FY20 to FY25, PSUs achieved a significant 36 percent CAGR in earnings, outpacing their private sector counterparts, and led to a 32 percent increase in the BSE PSU Index, according to findings from Motilal Oswal Financial Services Ltd.

Even with a slowdown anticipated in FY25, the fundamental profit engine remains robust. The long-term recovery narrative is supported by balance sheet clean-ups, favorable policies, and sector-specific structural changes, as the report indicates.

"PSUs have regained their position in the overall market capitalisation landscape. Their market share, which had fallen to 10.1 percent in FY22, has now risen to 15.3 percent, driven by a strong rally and profit growth," the report states.

Profits for PSUs surged from Rs 1.2 lakh crore in FY20 to Rs 5.3 lakh crore in FY25, significantly outpacing the growth of the private sector and reversing their previous underperformance from FY15 to FY20.

"Profitability metrics have improved significantly. Enhanced capital efficiency, operational discipline, and reduced losses have elevated RoEs across the PSU sector," the report highlights.

FY25 marks the fifth consecutive year of diminishing losses among PSUs.

The contribution from the BFSI sector climbed to 38 percent of PSU profits in FY25, up from just 7 percent in FY20. PSU banks, previously burdened by non-performing loans, are now leading the way with clean balance sheets, improving net interest margins (NIMs), and strong earnings projections.

Capital goods PSUs recorded a 28 percent CAGR in profits between FY20 and FY25, bolstered by orders in defence and infrastructure. Companies like HAL and BEL have become favorites among institutions, thanks to their strong execution and consistent earnings.

With solid fundamentals and favorable macroeconomic conditions, the next phase of re-evaluation is already in progress.

The BFSI sector is projected to contribute 53 percent of additional PSU profits over the next two years. Loss-making PSUs now represent merely 1 percent of the total profit pool, a significant drop from 45 percent in FY18.

According to the report, structural reforms have transformed the PSU landscape, resulting in an earnings base that is now broad, resilient, and of high quality.