2 Cheap PSU Stocks to Add in Your Portfolio

On August 18, Nifty touched a high of 16,701.85 and saw a low of 16,535.85 to end on 16,568.85. Sensex plummeted 0.3% to close on 55,629.49. The benchmark indices’ forward march was stalled by metal and banking stocks, whereas buying in FMCG and pharmaceutical companies held the fall. While going through the universe of less than Rs 50 stocks, we came across two stocks that hold promise for a bright future.   

SJVN Ltd

SJVN Limited (NS: SJVN ) is a Mini Ratna company managed by the Ministry of Power, Government of India. It was incorporated in 1988 as a joint venture of the Indian Government and the Government of Himachal Pradesh. So far, SJVN has commissioned seven projects with a combined installed capacity of 2016.5 MW and 86 km 400 KV transmission line. The company is implementing or operating power projects in Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, Uttar Pradesh, and Gujarat. Apart from these states, SJVN also operates in Nepal and Bhutan.

SJVN intends to take its power generation capacity to 5,000 MW by 2023 and 12,000 MW by 2030. With the Government of India’s focus on ‘Atmanirbhar Bharat’ and production linked incentive schemes for select sectors, the manufacturing industry’s power requirement will increase going forward. With these aggressive plans, SJVN’s top line is likely to grow in the coming quarters. It should, in turn, improve its financial performance. Notably, the company is also a good dividend paymaster. It has consistently declared dividends for the last five years. For the year ending March 2021, SJVN has paid a dividend totalling Rs 2.2 per share. At the current share price of Rs 26.40, the dividend yield turns out to be 8.33%. The scrip returned 12.3% in a year and 5.2% year-to-date. However, it declined 5.9% in the last six months and 4.7% in a month.

Rail Vikas Nigam Ltd

Rail Vikas Nigam Ltd (NS: RAIV ) is Miniratna public sector undertaking incorporated in 2003.  The company implements projects related to the creation and augmentation of rail infrastructure capacity. It is involved in railway projects such as track laying, electrification, and bridges, etc. It is also engaged in raising extra-budgetary resources for SPV (Special Purpose Vehicle) projects. RVNLwas listed on the stock exchange in April 2019 after Government’sGovernment’s 12.16% stake sale. After the Covid-19 pandemic, major manufacturing industries worldwide adapt the China+1 strategy for their supply chain needs.  India needs a solid infrastructure to have a slice of the world’s manufacturing hub. With roads and ports sectors on a growth trajectory, Indian railways remain the final frontier. RVNL’s railway operations include laying new lines, doubling—adding more lines to existing ones, gauge conversion, railway electrification, metro projects, workshops, etc. The company follows an asset-light model. The contractor brings all the human resources and required machinery. Most of its employees are on deputation resulting in lower fixed overheads on the employee front.

In Q1FY2022, RVNL reported a consolidated total income of Rs 3,869.1 crore, up 32.9% from Rs 2,910.8 crore in Q1FY2021. Net profit was Rs 232.3 crore, up 64.7% year-on-year. Total revenue CAGR was 26.7%, and net profit CAGR was 25.3% for FY2017-21. The stock returned 25.3% in a year and 20% in the year-to-date period. Although the scrip’s return was negative in the last six months, one month and five days, its dividend yield remains at 5.5%.