The unthinkable has happened!
Mukesh Ambani led Reliance has been upstaged as India’s largest company by market capitalization and the one who has managed to achieve this feat is by no means a veteran in the Stock Market.
Coal India, which listed on 4th November, 2010 and got included in the BSE Sensex on August 4 is a toddler by stock market standards and this makes the company’s claim to fame even more formidable.
Here’s how the market capitalization looks like for Reliance and Coal India
Reliance Industries’ market cap stands at Rs 248,662.36 crore and that of Coal India stands at Rs 250,728.08 crore
Coal India touched an intraday high of Rs 397.65 and an intraday low of Rs 387.50.
For the similar period, RIL stock prices remained stagnant and catapulted the market cap of Coal India higher than RIL.
For starters, Coal India’s tryst with the stock market has been nothing short of perfect. Coal India IPO witnessed tremendous response, got oversubscribed by multiple times and managed to list above Rs 300 (as against the IPO price of 245).
But over-subscription and premium listing is not a one-off case in Indian Stock markets. Where Coal India differentiated itself was that it seldom lost steam and continued its upward journey in-spite of the market driven ups and downs.
Coal India and Jubilant IPO are the only two IPOs in my knowledge that have done tremendously well among the IPOs that have come in the last 2 years.
However, more than Coal India taking the number 1 spot the worrying aspect is Reliance Industries losing the top spot.
Mr. Dhirubhai Ambani was the master player of the Indian Stock Market and he used the markets every now and then to raise capital.
However, ever since the split of business Reliance brand has had its share of setbacks. Global recessionary periods not withstanding, both Mukesh and Anil Ambani have failed to keep the investors happy which has resulted in fall of share prices for Reliance brand of companies owned by the brothers.
Again, market capitalization is a short-term metric and a jump in RIL share prices tomorrow can restore RIL’s place at the top but Coal India has managed to do what other companies in India have not managed to do for years.
Somewhere in a corner, ONGC must be managing a grin out of this news. Afterall, it was RIL which took away the ‘biggest company by market capitalization’ tag from ONGC
What are your thoughts on Coal India’s moment of fame as India’s biggest company?
Moreover, will Coal India be able to sustain the top spot for long enough because as they say "It is easy to become No.1 but difficult to sustain the No.1 position"
@dpi, thanks for your kind comment.
The latest news is ONGC beat RIL to the second position pushing RIL to the third position.
In continuation of my analysis of positive / negetives for the company in near future, my view on ONGC is as follows :
ONGC :
ONGC was contesting the royalties it is paying on behalf of Cairn since inception. Though holding only 30% share in Rajasthan fields, it is paying 100% royalties while Cairn is simply taking home all profits.
Now due to changing conditions, Govt has forced Cairn to agree to sharing the costs as a precondition to accepting share sale. This deletes the possibility of Cairn going to courts draging the issue. Cairn has accepted the consition.’
Now the positive for ONGC is two fold.
First it will have to pay only 30% of what it was paying till now.
Second, it gets all the excess payments from Cairn (Ofcourse not in cash but the amount will be adjusted against calculating costs and made recoverable)
The net effect is Rs.14,000 crores over the next 10 years.
It will have immediatel effect on profits, EPS, PE Ratio and consequently its share price.
Its very happy to see a Govt. subsidiary becomes the most valued organization of India. @Altaf – ur views are true.
@ Viral,
Thanks for the useful feed. As always you are more ‘well informed’ when it comes to companies :)
CONGRATS: Coal India becomes India’s most valued company on 17th Aug. Reliance Industries owned by Mukesh Ambani was knocked off its four-year long perch as the country's most valuable company by CIL. Proud to be a "Coal Indian".
What you said about this newly aquired No.1 status is a short term metric and depend on the share price of both CIL and RIL. A few rupees change in share price will change the top two positions. However if we look at how prices will behave in near future, I think CIL will forge ahead. My reasoning for this is as follows :
CIL :
Though mining has reached a saturation stage where aquiring new mines, operationalizing them, satisfying all new govt rules of social responsibilities will slow down the rate of growth, CIL has got an ace up its sleeve. E-auctions!!. As a govt entity which got all the mines by default, it is ordered to sell coal at nominated prices till now. But CIL is allowed now to sell 10% of its output through e-auctions which gets it double the price and the profits jump many fold. If CIL manages to get approval to increase the percentage of coal it sells through e-auctions (recently the courts have disallowed it to do so), its profits will jump many fold and consequently its EPS, PE ratio and subsequently its share price.
RIL :
RIL has already spread in all the sectors where it can. Though there are many greenfield projects in the concept stage, nothing is moving on ground. It can increase its profits only by debottlenecking / increasing efficiencies / marketing stratagies.
The biggest negetive for RIL is its gas production from KG basin is going down fast. Unless it drills more wells to keep up with output, the revenues and profits keep going down. This will cause reduced EPS, PE ratios and subsequently its share price.
From the above I think in near future, CIL will not only keep ahead of RIL but will march ahead.
On a different note, I have the following concern :
The same factors which are favoring CIL to go up are not working in favor of MOIL. The factors are – increased demand for mined produce, global tightness in production, protectionist policies of forign nations with mineral wealth are a positive for CIL.
I do not understand why the same factors are not working for MOIL which also is in the same mining sector producing key raw material for the nation and world supplies are behaving same like coal.
If you see the share price of MOIL, it is gradually going down since its IPO.
Any inputs from well informed persons?
Just my two paisa :)
Altaf,
MOIL, India’s biggest manganese ore producer, has been in a downtrend since its listing on the bourses on account of tight market and fall in prices of the ore for more than 40%.
The production of the manganese has far out-stripped the global demand creating a glut situation, which still might take another couple of years to see some tangible recovery. Moreover, MOIL has also asked for a hike in duty on import of ore to tackle cheap imports.