Ace investor Rakesh Jhunjhunwala thinks there is substantial upside potential in PSU stocks.

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In an exclusive interview with CNBC-TV18, Jhunjhunwala said the country is at the tail-end of corporate defaults and thematically public sector will give robust returns for investment.

“There are three reasons as to why I think PSUs will give good returns -- firstly, the corporate governance was not up to the mark and that was reflected in the way disinvestment was done. Once they start disinvesting strategically they will not have to sell Hindustan Petroleum Corporation Limited to Indian Oil Corporation, they will not even sell BPCL to IOC," Jhunjhunwala pointed out.

In the case of corporate tax cuts, the biggest beneficiaries are PSUs as they pay the highest tax. Furthermore, all these PSUs carry great fundamental value in them.

The investor further said the divestment of PSUs is the right approach. "There is no business for a government to be in business. Look what happened to Hindustan Zinc after Anil Agarwal bought it. Look at the value created. Once a public sector unit is there, there is pressure to use it for political purposes. Every party tends to do it, it is not about party, it is about politics. Worldwide capital is used much more efficiently by the private sector," he opined.

First Published:Oct 25, 2019 5:05 PM IST