Please See if You Can Avoid PSUs

We have spoken earlier about investing in Public Sector Units (PSUs; government owned and controlled companies), and why they should be avoided, as a thumb rule, by long-term, fundamental investors with small capital.

Today’s reaction in IRCTC’s stock starkly illustrates the point. Even though the IRCTC scrip has done well since its IPO a couple of years ago, the Ministry of Railways’ recent decision to claim half of IRCTC’s largest and most profitable revenue stream has shown how shareholders of PSUs can be blindsided by apparently arbitrary and unexpected government decisions.

Given all the factors to be dealt with in equity investing, the investor can do without a controlling shareholder or promoter wild card.

Business Standard article on the topic.