BT500: PSUs make a strong charge into the list of top 10 most profitable companies

If someone had told you that the list of top ten profitable companies would one day have five entries from the public sector, you might have laughed it off, right? Well, you can’t be blamed as, for years, PSUs were branded as a den of inefficiency and political interference. Not anymore.

In FY20, the BT500 profit-wise listing had three public sector undertakings (PSUs), State Bank of India (SBI), Coal India and Oil and Natural Gas Corporation (ONGC), in the top 10. In FY18, only ONGC and NTPC had made the cut. But the FY25 list has—apart from SBI, Coal India and ONGC—Life Insurance Corporation of India (LIC) and Power Finance Corporation (PFC) as well. Of course, the big boys in the private sector—ranging from diversified conglomerates such as Reliance Industries or RIL (first position) to those in banking and financial services such as HDFC Bank (3rd rank)—also delivered a solid performance as India Inc’s profit vanguards.

As corporate India enters challenging times, thanks to geopolitical uncertainties and the US’ tariff onslaught, it will be tested like never before. As the country faces these challenges with grit and will, can its most profitable companies, especially the PSUs, act as engines of a national revival?

A New Strategy

While there are many reasons for the performance of PSUs, one big factor is a more rational capital allocation strategy. “Today, these organisations have created infrastructure leading to scale. With the government in a more meaningful role, managements can have sharper focus,” says Deven R Choksey, Chairman and MD of wealth management and investment advisory firm DRChoksey Finserv. He gives the central government credit for encouraging PSUs to go for more capex and being tough with underperformers.

Power Finance Corporation has significantly realigned its business model, says Chairperson and Managing Director Parminder Chopra. “Reshaping the approach was not only relevant but also increasingly impactful in India’s evolving infrastructure landscape,” she says. PFC, from a pure-play conventional power sector lender, is now “a broader renewable and infrastructure financier.” Its portfolio includes waste-to-energy, renewable power equipment manufacturing, e-mobility, healthcare, sea water desalination, roads, ports and irrigation. This aligns the company with India’s rapidly evolving infrastructure needs and reduces risk.

That’s not all. PFC has deepened its focus on renewables to support the energy transition, says Chopra. “We finance solar, wind and other green energy projects. This forward-looking shift not only supports sustainability goals but also opens high-growth lending opportunities,” she says.

With size comes advantages. Choksey says SBI and Coal India have over the years grown to become “significant global players.” While there are many reasons for that transformation, he picks out the ability to think at scale as the key. “That is not created easily. It allows SBI to go about its digital strategy at a very different level,” he adds. Even in case of LIC, a significant market share (37.46% in individual and 71.19% in group segment) helped it grow on a large base. Chopra says scale has allowed PFC to innovate and diversify. “One of the clearest indicators of this growth is strong profitability, which has contributed to robust capital reserves and doubling of PFC’s net worth in the last five years. This has directly translated into a higher capacity to lend and allowed us to support larger and more complex projects in infrastructure and power,” says Chopra.

The strength of the bigger PSUs is an indication of how the strategy to expand has played out. ONGC accounted for 73% domestic production of crude oil and 56% of natural gas in FY25. Arunangshu Sarkar, Director (Strategy & Corporate Affairs), says the performance “is not a standalone outcome but a culmination of ONGC’s disciplined execution of a long-range strategy” built on three pillars—E&P (exploration and production) renewal, energy transition leadership, and financial resilience. To him, scale means strengthening businesses across dimensions. “ONGC, as one of India’s largest Maharatna companies, has the financial strength and institutional capacity to pursue large investment projects and strategic initiatives,” he says. These could be deepwater exploration or enhanced oil recovery (extracting oil from after primary and secondary stages) in mature oil fields.

The Round-up

Vinod Nair, Head of Research, Geojit Financial Services, says cost control also played a role in India Inc’s performance in FY25. “GDP took off and led to an uptick in volumes. But global inflation also fell,” he says. For example, benign crude oil prices lowered manufacturing and logistics costs. “A lot of companies with focus on exports gained from a depreciating rupee,” says Nair.

The topper on the list since FY15, RIL, has embarked on a massive diversification drive. The shift from the traditional oil and gas business to B2C—retail and digital—clearly helped. The two together accounted for 52% of the conglomerate’s earnings before interest, taxes, depreciation and amortisation (EBITDA). Chairman and MD Mukesh Ambani said after the FY25 results that the year had been challenging for the global business environment with weak macro-economic conditions and shifting geo-political landscape. “Our focus on operational discipline, customer-centric innovation and fulfilling India’s growth requirements helped us deliver a steady financial performance during the year,” he said. Analysts remain optimistic about RIL’s multiple businesses. “It is a strong EBITDA generator. A sector like retail is still underpenetrated, leaving huge headroom for growth. They have the ability to not just invest but back big-ticket projects like telecommunications,” says Vinit Bolinjkar, Head (Research) at brokerage Ventura Securities.

The willingness to invest is a common theme across most large PSUs. “A large part of that confidence has come from profit numbers. Removing inefficiencies is a big reason for that,” he says. Bolinjkar cites the example of LIC, which has a dominant market share, even in an underpenetrated market. “This is unusual. From this point, growth is inevitable for LIC.”

The thrust on volume is important. P M Prasad, Chairman, Coal India, says “volume growth maximises our revenue because the major cost is fixed. Any increase in volumes directly contributes to the bottom line.” A report by Motilal Oswal after Coal India declared last fiscal’s results said volumes would rise in FY26/27. Prasad says Coal India is “equally committed to sustainable and environment friendly mining practices to reduce the carbon footprint.” To him, the outlook is clear. “The future of coal and our company is strong and secure for at least the next two decades till renewable energy become more dominant than in the present scenario,” he says.

PSUs have also rewarded investors well. The BSE PSU Index has risen 153% between July, 1, 2022, and June 30, 2025. “If liquidity is strong, they outperform due to relatively cheaper valuations. However, investors must closely monitor execution and recovery capabilities,” says Shripal Shah, MD & CEO, Kotak Securities. He says disciplined investing and long-term horizon (upwards of 12 months) can make PSUs a rewarding bet. “The momentum, though, will hinge on the strength of domestic macro indicators,” he says.

The Language Of Tech

C.S. Setty, Chairman, State Bank of India, said after the Q4FY25 results that the focus remained on strengthening the balance sheet. The bank provided Rs 7,000 crore for pensions during the quarter. “We could have taken it in four quarters. Front-loading the cost has always been our strategy,” he said.

SBI’s merger with five associate banks in 2017 has had a positive impact on its performance. Ventura Securities’ Bolinjkar says the lending process is a lot more watertight now. “Its portfolio is more protected. It also has stricter collection mechanisms. NPA recognition is a lot stricter. One is seeing the benefits of technology adoption at scale,” he says.

In fact, technology is at the core of the business model. Setty said while announcing the Q4 results that the bank doubles in size every six-seven years. “We were Rs 30 lakh crore in 2018 and became Rs 60 lakh crore in 2024. We have not doubled our branches, we have not doubled our headcount, but have brought in efficiencies through digitalisation and strongly believe in new-age technologies like AI,” he said. SBI, he added, was an early adopter of predictive AI modelling in the banking sector.

Like SBI, HDFC’s merger with HDFC Bank meant the ability to capitalise on multiple growth opportunities. HDFC merged into HDFC Bank to create a $40 billion entity in April 2022. “It has transformed HDFC Bank into an owner of trusted home loan products from a reseller. Home loans have a longer duration and help the bank garner additional liabilities, offering more opportunities to cross-sell,” says CFO Srinivasan Vaidyanathan. With three subsidiaries coming into the fold, the larger entity can now sell more life insurance, general insurance and mutual fund products. “The addition of the home loan portfolio has resulted in a stronger balance sheet and ability to better tap into India’s growth story. The merger has created transformational opportunities,” he says.

A big part of the Indian banking sector’s growth has come from making technology indispensable. Vaidyanathan says scale with technology can help us serve more customers. “We can increase our reach since 51% of our branches are in semi-urban and rural areas. Today nearly 90% of our branches sell home loans. This, in turn, has enabled us to garner more liability relationships.”

For ICICI Bank, scale is about deepening presence across markets and consistent growth. Its spokesperson says its network (7,066 branches), with 13,376 ATMs, is a serious adopter of technology. “The bank leverages this apart from digital channels, partnerships and overseas coverage of India-linked business to drive growth.”

Amidst all this, the sector at the centre of so much transformation, information technology, is also focusing on increasing the size while keeping an eagle eye on profits. Tata Consultancy Services CEO & MD K Krithivasan says the businesses must adapt to transformation driven by emerging technologies, shifting customer expectations, and sustainability goals. “In this context, a strong balance sheet is not just a safety net but a channel for long-term sustainability and strategic decision-making. TCS’ positive cash flows, strong margins, and capital structure give us the flexibility to invest in growth without compromising on stability,” he says. In the time to come (and that will be for a long time), all eyes will be on AI and its impact. “It is obvious that future growth for the sector will depend on the AI story,” says Geojit’s Nair.

Growing on a large base is not easy and as India’s GDP takes the fourth spot, the journey has barely begun. Bolinjkar says the number can easily double. “It puts India in a sweet spot, but we must get it right on the execution front,” he says. As India Inc moves into top gear, the time for that could not have been better.

@krishnagopalan