Mumbai, Aug. 17: Barely nine months after it listed on the stock exchanges, state-owned Coal India has mid-wived one of the most incredible stories on Dalal Street by toppling Reliance Industries from its perch and becoming the country's most valuable company.
The Calcutta-based hewer of coal today notched up a market capitalisation of Rs 2,51,296 crore, nudging ahead of Mukesh Ambani's flagship company which reported a value of Rs 2,47,129 crore.
The Coal India stock, which first listed on the bourses on November 4 last year, has risen 16.21 per cent till date, while Reliance has wilted 32 per cent during the same period.
Both are principally energy resource companies: one is the largest producer of coal, while the other is the biggest refiner of crude oil.
Coal India's push to the top came in just seven trading sessions since it burst into the sensex on August 8. That itself is a fairytale ride: no other company has leapt into the index in a short span of nine months since listing.
The change at the top, though not unexpected, is a reflection of the huge demand for natural resources such as coal in an economy that is projected to grow at 8 per cent.
The fortunes of the two companies ' Coal India and RIL ' seem to have diverged because of perceptions of investors in a market that has been extremely volatile lately.
RIL has been under-performing the markets over several months primarily because of disappointment over the company's inability to ramp up gas output at its famed KG-D6 block. Revenues from its oil and gas exploration account for just 5.7 per cent of its gross turnover of Rs 276,371 crore in 2010-11, but that doesn't seem to have weighed with investors at all.
In the trading today, the Coal India stock closed with a gain of 2.64 per cent at Rs 397.85, translating into a market capitalisation of Rs 2,51,296 crore. On the other hand, the RIL share ended lower by Rs 4.20 at Rs 754.80.
"The writing was on the wall. There were two reasons for Coal India overtaking RIL. While investors have been bullish over the prospects of the coal producer and this has only strengthened after its good first-quarter results, the RIL share price has been falling over the past few months," said an analyst with a foreign brokerage.
For RIL, the change in the pecking order is tinged with a little bit of irony: it had emerged as India's most valuable company nearly four years ago after dislodging another state-owned giant ' ONGC. It has now been beaten by a nine-month old PSU newbie on the market.
The RIL stock has also been pounded after a draft report of the CAG said the company had been shown undue favours by the Union ministry of petroleum and natural gas and the Directorate General of Hydrocarbons (DGH) in its Krishna-Godavari (KG) block.
Experts point out that there are many things that are going in favour of Coal India, which is the largest coal producer in the world.
Akhil Jain, analyst at Aditya Birla Money, said in a report that the company enjoyed a competitive advantage over its global peers on account of its large coal reserves, lower cost of mining and lower capital expenditure costs.
The availability of huge reserves in India will see many coal-based power projects coming up. Moreover, after the Fukushima nuclear power disaster in Japan, concerns over safety are likely to result in a slowdown of future nuclear projects.
Another analyst says Coal India has huge cash reserves and will not be affected by the current environment of high interest rates or the economic uncertainty overseas.
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