FPIs raise their holdings in 30 of the 50 listed PSUs

Mumbai: Foreign fund managers have reposed their faith in public sector companies after a hiatus. Even as they pulled ₹2.27 lakh crore out of Indian equities so far this year, 30 out of of the 50 odd listed state-owned firms saw foreign ownership rising in the period. These include three firms owned by the Gujarat government.

Foreign portfolio investors' (FPIs) stake in National Aluminium increased from 13.30% to 16.71% between January and June, while in Hindustan Aeronautics, their stake rose from 3.15% to 5.56%. In Oil India, FPIs increase their stake from 10.11% to 12.42%. Similarly, these investors increased their stake in RCF, BEML, Chennai Petro, Engineers India, Shipping Corporation, Bharat Dynamics, and Mazagon Dock, among others.

As smart money chases value stocks, PSUs have managed to attract some of these flows due to strong balance sheets, higher dividends, lower valuations, and strong business prospects.
"Fund managers globally have shifted strategy from growth to value stocks," said Amisha Vora, joint MD, Prabhudas Lilladher. "Most PSUs that enjoy monopoly are valued at low PE multiples and have defensive business models with attractive dividend yields. This has led to increase in FPI holding."

Some of the PSUs in which FPIs have increased stake, such as National Aluminium, NMDC, SJVN, and Indian Oil, are currently trading at a dividend yield between 5% and 11%, while the majority of them, including GSFC, GNFC, National Aluminium, Oil India, RCF, Chennai Petro among other are trading at a Price to Earnings (PE) ratio of below 10 times. The Nifty is trading at a PE ratio of 20.11 times.

"Many PSU stocks are still available very cheap, especially when one focuses on various reforms pushed by the Modi government in the last eight years such as monetization of assets, Make-In-India, strengthening balance sheets of PSU banks, Jandhan yojana, increasing government spending etc. All these reforms are helping PSUs valuation and growth," said Vishal Vasant Wagh, research head, Bonanza Portfolio.