What makes PSUs the jewels of Fortune India 500

For the Fortune India 500—the elite list of India’s largest corporations—the public sector undertakings (PSUs) are the crown jewels entirely of a different kind. Take the 2020 list for instance. This year there are 65 PSUs who have made the cut, and they account for 13% of the list universe.

But, the same 65 companies, with cumulative revenues in excess of ₹2.92 lakh crore, accounts for 32% of the total revenue of this year’s list which stood at ₹9.05 lakh crore. Similarly, against the total profit of the 500 companies, which is worth ₹3.56 lakh crore, the 65 PSUs’ cumulative profit of ₹96,894 crore commanded a whopping 27% share.

And when it comes to equity dividend, out of the list’s total pay-out of over ₹73,941 crore, a staggering 45% of the total equity dividend, worth over ₹33,393, was doled out by just 23 of the 65 PSUs. And within the 23 dividend payers, four companies from the oil and gas sector dominate with a total pay-out of over ₹11,343 crore.

These four oil and gas PSUs include Indian Oil (₹3,902 crore), Bharat Petroleum (₹3,579 crore), Gail (India) (₹2,886 crore), and Oil India (₹975 crore). But the oil and gas PSUs’ feat in the Fortune India 500 is not just about equity dividend.

These public sector oil and gas companies, in fact, are the reason behind the overall PSU lustre seen on this year's 500 list. There are eight companies from the oil and gas sector in the list, with respective cumulative revenue and profit of ₹19.95 lakh crore and ₹69,866.55 crore, accounting for 22% and 20% of the total revenue and profit respectively.

However, when you exclude Reliance Industries—which replaced Indian Oil Corporation (IOC) and became the number one company on the list since 2019—and Nayara Energy, along with the erstwhile Essar Oil, which is now majority-owned by Russia’s Rosneft, the remaining six oil and gas companies are only PSUs, led by IOC, which ranks number 2 on this year’s list, with revenue of ₹4.94 lakh crore.

At number 3 and number 5, Oil and Natural Gas Corporation (ONGC) and Bharat Petroleum Corporation (BPCL) have revenue of ₹4.05 lakh crore and ₹2.89 lakh crore each. While ONGC reported profit of ₹10,907 crore, BPCL’s profit stood at ₹3,055 crore. While IOC reported net loss of ₹893 crore in FY20, it doled out equity dividend worth of ₹3,902 crore—the highest among the oil and gas PSUs. And, BPCL followed suit with a dividend outgo of ₹3,579 crore.

Overall, the six oil and gas PSUs have cumulative revenue of over ₹12.92 lakh crore—accounting for 14% of the total revenue of the 500 companies. Similarly, at ₹28,036 crore, the cumulative profit of these six companies accounted for 8% of the total profit of the 500 companies.

When it comes to cumulative equity dividend from the oil and gas PSUs, four of the six companies doled out dividend worth ₹11,344 crore which accounted for a shade over 15% of the total equity dividend of the 500 list.

However, not everything is rosy. On an aggregate basis, out of the 65 PSUs on the list, eight companies— comprising of seven public sector banks and one government-owned non-banking finance company—continued to be loss-makers in FY20, like in FY19, with their cumulative losses adding over ₹32,448 crore.

Moreover, six public sector companies became loss-makers in this year's list, compared to being profitable last year, with cumulative losses added over ₹5,896.5 crore. On the other hand, four PSUs turned a corner and shunned the loss-makers tag this year, having made profits adding up to ₹1,268 crore.

While the country’s largest corporations make it to the Fortune India 500—which has been around since 2010—the true jewels of the list are the public sector units. These companies prove not only to be defensive stocks for investors, but also the best bets for those who want to earn steady returns on their investments in the form of equity dividends.