India’s PSUs have delivered a strong turnaround since the pandemic, with FY20–25 PAT CAGR at 36%, outpacing private firms. Despite FY25 earnings consolidation, PSU banks led growth. Valuations have moderated, but fundamentals remain robust. BEL and HAL are well-positioned with strong order books and policy tailwinds, supporting double-digit earnings growth over FY25–27.
(BEL) is poised for strong growth, backed by a robust INR 270 billion order pipeline and strong tailwinds from defence indigenization. The company expects 15% revenue growth in FY26, led by the execution of large orders such as QRSAM and next-gen corvettes, ensuring healthy revenue visibility through FY27.
Consistent R&D investments, enhanced localization, and a strong, debt-free balance sheet with INR 94 billion in cash enable margin resilience and room for capacity expansion. We expect revenue/PAT/EPS CAGR of 17%/16%/19% over FY25–27.BEL was also among the top five gainers in PSU market cap rankings in FY25, reflecting investor conviction in the capital goods-led PSU growth theme.
HAL posted a resilient FY25 with 10% YoY PAT growth, supported by improved margins and normalization of provisions. Despite conservative 8–10% revenue growth guidance, HAL’s robust INR 1.8 trillion order book and resolution of engine supply issues for Tejas Mk1A aircraft support execution momentum. The company aims to deliver 12 LCA aircraft in FY26.
We model a revenue/PAT CAGR of 21%/14% over FY25–27, supported by stable EBITDA margins (~29%), strong cash flows, and manageable capex. HAL has also climbed to the 3rd spot among PSUs by market cap in Jun’25, highlighting sectoral leadership and sustained investor interest.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
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