Public Sector Undertakings (PSUs) were companies set up by the Government India and also state Governments to drive
industrialization in India. The Indian economy was liberalized in 1991 and private sector companies were allowed in most
industry sectors. PSUs still dominate almost all core sectors that are important for the growth of the economy. Through
disinvestments Government has allowed public participation in PSU stocks.
Birla Sun Life PSU fund is an open-ended thematic fund investing in PSU stocks focuses largely on sectors like oil,
gas, power, mining, banking, financial services and insurance sector, defence and engineering.
Why PSUs will continue to remain important?
- PSUs will continue to dominate sectors where entry barriers are high in terms of capital requirements, regulatory
clearances (particularly sectors which are related to national security), distribution reach and other factors.
- These include sensitive sectors like defence equipment, aerospace and ship building. Sectors which require high capital
outlay like oil and gas, oil refineries, coal mining, iron and steel, power generation and distribution etc.
- PSUs will continue to dominate infrastructure sectors e.g. highways, railways, dams, ports, airports etc.
- Even in sectors where there is significant private sector presence e.g. banking, insurance etc., PSUs shave the largest
market share and distribution network.
Why should you invest in PSUs?
- The scale and capacity of PSUs is much higher as compared to any other comparable private player.
- PSUs have deep competitive moats especially in core sectors of the economy. Therefore, they have stable cash-flows
with reasonably high visibility in future earnings.
- Since Government of India is the majority owner of the central PSUs, they rely on their dividends to fund budget
deficit. As a result, PSU public shareholders also enjoy high dividend yields.
- The 2020 Union Budget, the Government unveiled plans to unlock the value in select PSUs through strategic
disinvestments. We in Eastern Financiers think that this will present attractive investment opportunities for our
- The Prime Minister has articulated his vision of India becoming a $5 Trillion economy over the next few years.
PSUs will have to play a leading role for achieving that vision.
Why are PSUs attractive now?
About Aditya Birla Sun Life PSU Fund
scheme was launched at the end of last year. It invests predominantly in in PSUs or companies in which central/state
government have at least 51% shareholding. The scheme will focus on a portfolio of 30-35 stocks, with an intended 60-70%
exposure to large caps and the balance to mid & small caps. Bottom-up approach would be followed for stock-picking.The scheme
will seek to invest in companies which have prospects of future growth & scalability, reasonable Return on Equity,
sustainable cash-flows to maintain their dividend yield and reasonable valuations in relation to the broader market.
Easter Financier’s views on the Fund
- We expect PSUs to perform well in the economic recovery from COVID-19 due to the inherent advantages they enjoy as
discussed in this article and also from favourable Government policies
- PSU stocks are trading at very attractive valuations and provide compelling investment opportunities for investors
with 3 to 5 year investment horizons
- Aditya Birla Sun Life is one of the largest Asset Management Companies in India with good long term track record
of delivering good returns to investors
- Tactical investments in thematic funds like Aditya Birla Sun Life PSU Fund can complement your core portfolio of
diversified equity funds. You can allocate up to 5 – 10% portion of your equity portfolio to this fund.
- You can contact with your Eastern Financier’s financial advisors if you want to know more about this fund and its
suitability for your investment needs. You can also contact us at 080-40006800 / email us at email@example.com and our advisors will get in touch with you.