Navratna Stocks: Types, Eligibility and benefits

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July 20, 2024
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by Arun Singh Tanwar

A Look at India’s Top Navratna Stocks: Types, Eligibility, & Process Explained

Overview

The multibagger public sector unit (PSU) has surged 10% in a single trading session after securing a ₹36 crore-worth order. This significant order has led to a massive 375% return in just one year, making it a standout performer in the market. The emerging numbers are a testament to the growth potential of Navratna stocks. With the continued support and appealing future performance in India, the question arises – what are Navratna stocks, and how do the company become eligible for them? This blog guide will take you through the definitions, types, significance, and process of Navratna stocks while listing all the companies till now.

What are Navratna Stocks?

Navratna companies are a special group of top public sector companies in India that have been given more freedom to make their own decisions and manage their money.

There are mainly two categories of Navratna stocks:

For Category I Miniratnas: The company must have earned profits continuously for the last 3 years and must have made a pre-tax profit of Rs 30 crore or more in at least one of those three years. Currently, there are 63 such CPSEs.
For Category II Miniratnas: The company must have made a continuous profit over the past 3 years and maintained a positive net worth. There are currently 15 such CPSEs.

Key Takeaways

There are currently 16 Navratna companies in India, working in different areas like energy, minerals, railways, etc.
To become a Navratna company, a public sector company must already be doing very well financially for the past 3 years. It must also meet certain other requirements.
Navratna status allows these companies to spend up to ₹1,000 crore on a single project without needing the government’s approval. They can also invest up to 30% of their total wealth in a single project in a year.
Some examples of Navratna companies include Bharat Electronics, Container Corporation of India, Engineers India, Hindustan Aeronautics, ONGC Videsh, and Shipping Corporation of India.
These Navratna companies are very important for India’s economic growth and development. They make huge investments, work on new ideas and innovations, and provide high-quality products and services.

Also Read: Oil and Gas Stocks

Eligibility Criteria of Navratna Companies

To be eligible for Navratna status, a CPSE must already be a Miniratna Category I company, have an excellent financial and operational track record, and meet specific performance criteria set by the government. This ensures that only the top-performing public sector enterprises are granted the prestigious Navratna designation.

Based on the search results, here are the key points about the eligibility criteria for Navratna companies in India:

General Eligibility Criteria of Navratna Companies

All navratna companies falls under the general category of criteria:

Miniratna Category I Status

The company must have already attained Miniratna Category I status.
Miniratna Category I companies are those that have consistently made profits for the past 3 years.

Schedule A Listing

The company must be listed under the Schedule A category of Central Public Sector Enterprises (CPSEs).

Memorandum of Understanding (MoU) Rating

The company must have received an “Excellent” or “Very Good” rating under the MoU system for at least 3 out of the last 5 years.

Composite Performance Score

The company must achieve a minimum composite score of 60 or higher based on the following 6 performance parameters:

Net Profit to Net Worth

Profit Before Depreciation, Interest and Taxes (PBDIT) to Capital Employed
Manpower Cost to Cost of Production/Services
Gross Margin as a Percentage of Capital Employed
Gross Profit as a Percentage of Turnover
Earnings Per Share

Board Composition

The company must have at least 4 independent directors on its Board of Directors.

Eligibility Criteria for Miniratna Category I Companies

To be eligible for Miniratna Category I status, a Central Public Sector Enterprise (CPSE) must fulfill the following criteria:

The company must have made profits continuously for the past 3 years.
It should have a pre-tax profit of at least ₹30 crore in one of the 3 preceding years.
Alternatively, the company must have an average annual turnover of at least ₹120 crore during the last 3 years.
The company should have a positive net worth.

Eligibility Criteria for Miniratna Category II Companies

To be eligible for Miniratna Category II status, a Central Public Sector Enterprise (CPSE) must fulfill the following criteria:

The company must have made profits continuously for the past three years.
It should have a pre-tax profit of at least ₹20 crore in one of the three preceding years.
Alternatively, the company must have an average annual turnover of at least ₹80 crore during the last three years.
The company should have a positive net worth.

List of Navratna Stocks in India 2024

In 1997, the Government of India approved the Navratna status of 9 companies, and later 14 new companies were added to the list by CPSEs. Earlier, 16 companies were listed in the category of Navratna, which now is updated as Power Grid Corporation and HPCL are added to the Maharatna category. Here is a brief list of Navratna companies in India:

Sr. No.	Company Name	Established Year
1	Bharat Electronics Limited (BEL)	1954
2	Container Corporation of India Limited (CONCOR)	1988
3	Engineers India Limited (EIL)	1965
4	Hindustan Aeronautics Limited (HAL)	1940
5	Mahanagar Telephone Nigam Limited (MTNL)	1986
6	National Aluminium Company Limited (NALCO)	1981
7	National Buildings Construction Corporation Limited (NBCC)	1960
8	Neyveli Lignite Corporation Limited (NLC India)	1956
9	National Mineral Development Corporation Limited (NMDC)	1958
10	Rashtriya Ispat Nigam Limited (RINL)	1971
11	Shipping Corporation of India Limited (SCI)	1961
12	Rail Vikas Nigam Limited (RVNL)	2003
13	ONGC Videsh Ltd (OVL)	1965
14	Rashtriya Chemicals & Fertilizers Limited (RCF)	1978
15	IRCON International Limited	1976
16	RITES Limited	1974

Benefits of Navratna Stocks

Among the various benefits of growing hand-in-hand with the government of India, there are several benefits to listing oneself under the Navratna companies. Some of them are :

More Freedom with Money

Navratna companies have more control over how they spend their money compared to other government-owned companies.
They can invest up to ₹1,000 crore (or 15% of their total wealth) in a single project without needing the government’s approval.
Navratna companies can also invest up to 30% of their total wealth in a year, as long as it stays under the ₹1,000 crore limit.

Easier to Expand and Grow

Navratna companies have more freedom to form partnerships, create new companies, and open offices in India and other countries.
This gives them more opportunities to grow their business and try new things.

Become More Efficient:

The extra freedom and flexibility help Navratna companies work more efficiently and become more competitive.
This can lead to better financial performance, new innovations, and better ability to meet customer needs.

Respected and Recognized:

Being a Navratna company is seen as a mark of excellence and financial strength.
This can improve the company’s reputation and make it more trusted by people.

Attract Top Talent:

The extra benefits and growth opportunities at Navratna companies can make them more attractive places to work.
This helps them hire and keep the best employees.

Criticism & Consideration of Navratna Stocks

One of the main concerns is that the Navratna companies might not be accountable enough to the government and the public. With more freedom to make their own decisions, there’s a worry that they might not always do what’s best for everyone, and instead focus on their own interests. This could lead to problems like mismanagement, corruption, or decisions that don’t really help the public.

Another issue is that the Navratna companies might have an unfair advantage over private companies. They get easier access to things like money, resources, and other benefits, which can make it harder for private companies to compete. This could slow down innovation and growth in the private sector. There are also questions about the criteria used to decide which companies become Navratna – some people think it might not be the best way to judge a company’s potential or how well it serves the public.

When it comes to considering the Navratna program, the government has to be careful to balance giving the top public sector companies enough freedom to be successful, while also making sure they are still accountable and don’t misuse their power. It’s a tricky balance to strike, and there are debates about how to do it in the best way.

Conclusion

In a nutshell, Navratna stocks were introduced in 1997 by the government by giving Navratna status to 9 companies. All these companies are recognized by the government and have shown massive brand value and performance in the past. As India’s public sector enterprises continue to evolve and adapt to the changing economic dynamics, the Navratna stocks are poised to play an increasingly vital role in driving the country’s industrial and economic progress. However, if investors are looking to invest in them, it’s also important to look into the future potential and growth aspects.