State-owned bank stocks have been leading the list of laggards in the recent equity market correction, plagued by a slew of corporate governance issues and ballooning bad loans.
The NSE Nifty PSU Bank index has lost nearly 24 percent so far this year, making it the worst performing sectoral gauge among the 11 compiled by the bourse.
While the slump in public sector banks has been well-documented, a study of 60 government-owned stocks show PSU stocks have underperformed their peers on most counts—be it financial growth or share performance—in the last five years.
Twenty-five of these companies, including banks, have given negative returns over a period of last five years. Fourteen of the government-owned companies gave low single digit returns compared to a 14.2 percent return on a compounded annual growth rate given by the NSE’s benchmark Nifty 50 over the same period.
The top five public sector undertakings, excluding Indian Oil Corporation, have delivered negative to low single-digit returns in last five years. On the profitability front, the compounded annual growth rate over the past five years has been flat-to-negative.
The defence companies have been a bright spot among the lot, courtesy the government's 'Make in India' push. Besides, these companies have found investor favour as many of them are being looked at as divestment candidates. Moreover, BEML Ltd. and Bharat Electronics Ltd. have given a compounded annual return of 50 percent and 34 percent, respectively over the past five years.
Shares of MMTC have fallen nearly 21 percent in the last five years in the backdrop of a 29 percent revenue CAGR decline in the last five years.