Coal India likely to topple RIL as most valuable firm

Reliance Industries Ltd (RIL) may lose its tag as India’s most valued company to state-owned Coal India Ltd (CIL) for the first time in nearly a decade, due to a sharp fall in its share price in recent months.

At the end of on Friday’s trading on the Bombay Stock Exchange (BSE), heavyweight RIL’s shares closed at Rs 760.8, down 1.6 per cent, with a market cap of Rs 2.49 lakh crore. CIL’s shares closed almost flat at Rs 385.3, for a market valuation of Rs 2.43 lakh crore.

Thus, the gap in the market cap of both companies is just 2.3 per cent. In fact, the gap has narrowed by a staggering Rs 1.45 lakh crore since the listing of CIL on November 4, 2010. CIL has gained 57 per cent since its listing from an issue price of Rs 245, while RIL has lost 31 per cent during the same time.
 

ALMOST THERE Coal India since its listing on the BSE last year
Milestones	Date	Mcap	Rank
Listing date	Nov 04, ‘10	2,16,240.58	4
Rank 3 for first time	Mar 15, ‘11	2,13,335.06	3
Rank 2 for first time	May 23, ‘11	2,31,020.87	2
Slipped to 4th place	Jul 08, ‘11	2,28,652.23	4
Back on 3rd	Jul 12, ‘11	2,30,673.47	3
Back on 2nd	Jul 27, ‘11	2,52,117.51	2
Included in Sensex 30	Aug 08, ‘11	2,47,790.80	2
Inching to become No 1	Aug 12, ‘11	2,43,369.35	2
(Mcap Rs  Crore)                            Compiled by BS Research Bureau

CIL, which became a part of the 30-share BSE Sensex this month, will gain an entry into the 50-scrip S&P CNX Nifty of the National Stock Exchange during its next constitution, say market analysts.

So, what do the changing equations suggest?

“RIL has lost its charm with retail investors,” said Ambareesh Baliga, chief operating officer of Way2Wealth. “Till a couple of years ago, it was a bellwether stock, but no longer the counter has the ability to move markets or change moods. Its large retail shareholding base was eroded on the back of falling share price.”

Between April and June quarters, retail investors offloaded a million shares, while mutual funds sold two million shares. Foreign institutional investors sold 10.05 million shares worth Rs 800-1,000 crore and financial institutions and banks offloaded 0.3 million shares.

Life Insurance Corporation (LIC) showed much support and faith in RIL in these months by acquiring 1.86 million shares. Also, other corporate bodies, whose names were not disclosed as they fall in the non-institutional and non-promoter category, bought 70 per cent, or 10.1 million shares, when the stock was on a crash course. The promoters hold 44.72 per cent in RIL.

RIL’s weight in the Sensex has come down below 10 per cent for the first time in many years due to a fall in its shareholder base. But it is still the highest-weighted company in the Sensex, with a 9.90 per cent share in the index constitution, ahead of Infosys (8.37 per cent) and ICICI Bank (7.83 per cent). The shareholder base is one of the criteria to account for a company’s weight in the index. The shareholder base of CIL, too, is not very large, as 90 per cent of its shareholding is concentrated with the government and majority of floating stock with large institutions.

“Though RIL may take a long time to regain its glory as the market mover, CIL cannot move markets, as its investor base is very low, and unless the government decides to dilute more stake. A counter with high floating stock and investor base is required to change the market direction, along with positive news. While it has a huge floating stock, RIL lacks any positive trigger currently,” said Baliga. Even the $20-billion deal with BP, recently approved by the government, failed to push RIL’s share price.

For CIL, the world’s largest coal producer, its undervalued IPO did the most to get in investors, which in turn saw the share price rising. For RIL, it has been the constant flow of bad news, ranging from family feud, SEBI probing the company on insider trading charges to the Comptroller and Auditor General of India pointing out its role in inflating project costs at Krishna-Godavari oil and gas fields.