BAJAJ BROKING
July 07, 2024
7 mins read
Miniratna companies in India are those high-performing public sector undertakings (PSUs), which have a greater degree of autonomy in their operations than other PSUs. The central government awards them a higher degree of autonomy in acknowledgment of their robust financial performance over the years. These companies can be great from an investment viewpoint as well. Some of these companies are Bharat Dynamics Limited, Dredging Corporation of India, NHPC Limited, and Garden Reach Shipbuilders & Engineers.
While day-to-day stock market conversations centre around private companies, we should not forget that apart from private companies, India also has a number of top-performing public sector undertakings (PSUs).
Within this category of PSUs, we also have something called “Miniratna Companies” in India. You may be wondering what a miniratna company is. Miniratna companies are those PSUs, which exhibit superior financial performance compared to other PSUs. Therefore, the central government grants them a certain degree of autonomy in their day-to-day operations and also in their decision-making.
To be awarded the status of a “Miniratna” is no mean feat. For this, a PSU has to demonstrate solid financial performance over the years. As per the central government, such companies fall into two categories.
In Category I, we have companies that have reported a net profit over the last three financial years. Besides, such companies should have a minimum pre-tax profit of Rs. 30 crores in at least one of the last three years. Moreover, such companies must have a positive net worth in the last three years.
In Category II, we have companies that have recorded a net profit and a positive net worth over the last three financial years. Moreover, they should have reported a pre-tax profit of at least Rs. 20 crores in one of those three years and have an average annual sales to the tune of Rs. 80 crores in the same period of time. Having learnt what a miniratna company is, let us move on to other aspects.
Here are five things to know about Miniratna companies in India:
These companies are high-performing PSUs, which are owned by the Government of India.
Due to their superior performance, the government allows them a higher degree of autonomy than it grants to other PSUs.
Miniratna companies in India are categorised as such based on specific criteria laid down by the central government.
These companies operate in sectors which are of crucial importance to the Indian economy, including aviation, telecommunications, defence, engineering, etc.
Due to the autonomy Miniratna companies enjoy, they do not need approvals from the central government when it comes to joint ventures and other business decisions.
You may be thinking why invest in Miniratna companies. These are the top 3 reasons you should do so:
Many Miniratna enterprises are top companies in their respective sectors due to their rock-solid performance and a great track-record. Some of the top Miniratna companies include Bharat Earth Movers Limited (BEML), Cochin Shipyard, Hindustan Copper Limited, National Fertilisers, etc.
Miniratna companies are granted this status because of their superior performance compared to other PSUs. Therefore, they tend to be high-performing companies, and this is why you should consider investing in them.
Miniratna companies are backed by the central government. As they enjoy a certain level of autonomy, their performance is not negatively impacted due to government ownership.
Investing in Miniratna companies offers several benefits, making them an attractive option for investors.
These companies have a proven track record of financial stability and performance, having demonstrated consistent profitability and positive net worth. This makes them reliable investment options with lower risks compared to other stocks.
Miniratna companies benefit from a certain level of autonomy granted by the government, allowing them to make quicker business decisions without excessive bureaucratic delays. This operational flexibility can lead to higher efficiency and better growth prospects, enhancing shareholder value.
These companies often operate in critical sectors such as defence, telecommunications, and infrastructure, which are essential to the Indian economy. Their strategic importance ensures continued government support and investment, which can contribute to their long-term stability and growth.
Many Miniratna companies offer attractive dividend yields, providing a steady income stream for investors. Given their solid financial foundation and government backing, these dividends are relatively secure, adding to the overall appeal of investing in Miniratna companies.
Below is the list of the best miniratna companies:
Bharat Dynamics Limited: An important defence manufacturer, this company makes missiles, launchers, torpedoes, and many other equipment for the Indian armed forces.
Dredging Corporation of India: This company is extremely crucial for the maritime sector because it maintains sufficient depth in ports for the safe movement of vessels.
NHPC Limited: It is into planning and constructing hydroelectric power plants in the country. Besides, it also produces power through other energy sources like wind and solar energy.
Garden Reach Shipbuilders & Engineers: Based out of Kolkata, this company builds warships for the Indian Navy.
Goa Shipyard Limited: Based out of Goa, this Miniratna company manufactures and repairs vessels for the offshore oil and gas industry.
MMTC: This significant player is into trading various commodities, like coal, iron, steel products, non-ferrous metals, etc.
Indian Railway Catering & Tourism Corporation Limited (IRCTC): IRCTC takes care of train catering services in India and other food-related businesses at railway stations.
IRCON International Limited: It is an engineering and construction company of the Railways Ministry. It takes care of infrastructural projects, like track electrification and new railway lines.
Mangalore Refinery & Petrochemical Limited: This is a major oil refinery and petrochemical player in India. It is into refining crude oil, producing petrochemicals, and manufacturing lubricants, bitumen, etc.
Railtel Corporation of India: This company provides neutral telecom infrastructure. It owns an India-wide optic fibre network along railway tracks.
Several Miniratna companies have performed remarkably well over the years.
For example, the sales and net profit of Dredging Corporation of India have grown at a compounded annual growth rate (CAGR) of 6% and 59.5%, respectively, from FY 2019-20 to FY 2023-24.
The sales and net profit of Railtel Corporation of India have grown at a CAGR of 20.6% and 15.5%, respectively, from FY 2020-21 to FY 2022-23.
The sales and net profit of Mangalore Refinery & Petrochemical Limited have grown at a CAGR of 14.6% and 67.9%, respectively, from FY 2018-19 to FY 2022-23.
Certainly, these Miniratna companies are growing at a remarkable rate. Therefore, they can be considered for investment.
If you are keen to invest in Miniratna companies, you may be wondering where to begin. So, here are some tips:
Check the performance of such companies over the last 5 years. Observe how their net profit, net sales, cash flows, assets, and liabilities have grown.
Some Miniratna companies, like IRCTC and Railtel Corporation of India, enjoy a monopoly status. Therefore, they do not have a direct competitor. As a result, such companies enjoy a strong status in their industry. Hence, they can be considered for investment.
Before investing in a Miniratna company, analyse how they have utilised the autonomy granted to them by the government. If they have used this autonomy to initiate high-return projects or fruitful joint-ventures, you can consider them for investment.
Such companies tend to be financially well-managed. This is why they get the status of a “Miniratna.” As an investor, the biggest benefit of investing in Miniratna Companies is that you know they are financially prudent.
Typically, they are in sectors like defence, aviation, railways, and telecommunications. These sectors are essential for the Indian economy. As the economy grows, such sectors too will grow. Hence, Miniratna companies are likely to grow at an appreciable rate.
Many Miniratna Companies depend a lot on government policy. In case the policy is not favourable, their growth prospects may get affected. As an investor, you should always consider government policy before investing in a Miniratna Company.
Miniratna companies in India can offer great investment potential to you. That said, before investing, you should carefully analyse their performance. Also, keep in mind that government ownership can give a boost to companies and at times can also affect their performance.
If you are on c platforms, do read the latest news and reports about miniratna companies to form an informed opinion. Once you have done your research, then you should think about whether you should invest in such companies or not.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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The status of a “Miniratna” is awarded to high-performing PSUs by the central government. In acknowledging their performance, the government grants them greater autonomy than it grants to other PSUs.
Miniratna companies tend to have a decent track record over the years. Some of them even enjoy a monopoly status in their industry. Hence, you should consider investing in them.
The best Miniratna to invest in depends on sector performance, financial health, and growth prospects. Select wisely.
You can go to the website of a miniratna company. You can even visit the sites of the Bombay Stock Exchange and National Stock Exchange to check their financials.
These companies are government-owned. At times, government policy may adversely affect their operations. But, it is case-to-case basis.
You can go to their websites. You can also refer to certain government websites to know updates about Miniratna companies, for example, the website of the Department of Public Enterprises (https://dpe.gov.in/).
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