To Be India’s Most Valuable Company

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Coal India and Reliance Industries, big earners both, are battling it out for market capitalisation supremacy in India

The tussle for the top spot on Indian bourses continues. Last week, the state-owned Coal India Ltd became the country’s largest company by market capitalisation, displacing Reliance Industries Ltd (RIL). On 23 August, the RIL stock inched up over 1 per cent, and snatched back the No 1 position with a market cap of over Rs 250,000 crore. However, the difference between the two companies is so narrow—about Rs 3,000 crore—that Coal India can easily bounce back again.

What is interesting about this war over their scrips’ worth on paper, and in the minds of investors, is the nature of the two companies. Gone are the days when new economy giants like Infosys and Wipro ruled the stockmarket. Even professionally-managed companies, like those in the Tata Group, have lost their sheen lately. Ironically, what today’s investors love are brick-and-mortar megacorps that operate in areas like coal mining and gas exploration and are owned by business families or the Government.

Both Coal India and RIL are monopolies or near-ones in their own way. In the private sector, the Mukesh Ambani-owned RIL is India’s largest producer of gas, refinery products (petrol and diesel), petrochemicals and synthetic fibres. Coal India is a clear monopoly, whose annual coal production is 430 million tonnes. Both have been huge beneficiaries of government policies; the recent decision to allow coal mining in several ‘no go’ forest areas has been a big reason for the spike in Coal India’s stock price.

In addition, RIL is mired in a huge controversy. A draft CAG report has concluded that the company ‘gold plated’ (or deliberately hiked) its exploration investments in the D6 gas blocks, off the Godavari coast in Andhra Pradesh. It was an allegation also hurled by Mukesh’s younger brother, Anil, during their sibling rivalry days between end-2004 and mid-2010, before they finally smoked the peace pipe. RIL has denied these charges, and given a long reply to the CAG.

So, why are investors so enamoured of these two scrips? The simple reason: their profitability and huge margins. In the last five years, Coal India’s profits have jumped fivefold; RIL’s profits zoomed 70 per cent during the same period. While RIL earned an impressive net profit of over Rs 20,000 crore in 2010-11, Coal India earned almost Rs 10,000 crore. These are figures for thought.