PSUs dominate market-cap chart

After Mukesh Ambani, the promoter of the country's most valuable companies is the government. Four of the five most valuable companies on Dalal Street are public sector undertakings, which have raced ahead of the private FMCG, information technology and telecom majors.

Till 15 days ago, only two PSUs "" Oil and Natural Gas Corporation (ONGC) and National Thermal Power Corporation (NTPC) "" ranked amongst the five most valuable companies. But with two more PSUs, Mineral and Metals Trading Corporation (MMTC) and National Mineral Development Corporation (NMDC), seeing sustained rise in the last three months, the number has risen to four.

Analysts attribute the rise in the market prices of MMTC and NMDC to the huge potential in exports of minerals. The trigger for MMTC came from its proposal to float a commodity exchange with IndiaBulls Ltd. The PSU major will have 26 per cent stake in a special purpose vehicle to be floated for the purpose.

NMDC, the country's largest producer and exporter of iron ore, has reportedly decided to enter the spot market for iron ore. The move comes at a time when global iron ore prices have shot up nearly 70 per cent in the past two months, riding on strong demand from China. The government is also planning to clear the much-delayed new Mining Policy in a month's time to attract more investments from abroad.

The key takeaway of the policy is that it will include speeding up permits for mining. It would also bring a host of opportunities to the mining equipment and allied sectors.

MMTC, a trading company owned 99.33 per cent by the state, has been in the news for unbroken trading at the upper circuit in the last two months. The company's stock has risen a whopping 710 per cent from Rs 4,530.64 on August 31 to Rs 42,483.30 on November 2. The company's market capitalisation stands at Rs 212,417 crore.

NMDC, which is owned 98.3 per cent by the government, did not see the same spectacular rise as MMTC but still gained 201 per cent in the last two months. The NMDC stock has moved up from Rs 4,995 on August 31 to Rs 15,042 on November 2. Its market capitalisation works out to Rs 198,777 crore.

Though PSUs have been dominating rankings in terms of sales and profits over the last decade, these companies have never been a force to reckon with on Dalal Street. ONGC was the only exception "" as early as in November 2000, it was ranked eighth in the valuation sweepstakes with market capitalisation of Rs 15,378 crore.

After that, the company steadily improved its ranking to emerge on top in 2004 with market capitalisation of Rs 112,483 crore.

It was only in 2006, that it was nudged from that spot by Reliance Industries, which continue to hold it number one position till date.

NTPC, which made its maiden public offer in early-2006, joined the big league on debut with a slot on the ten most valuable companies. The company then leapfrogged on to the fifth slot after the market re-rated all power stocks.

While PSU stocks like NTPC gained in the markets, IT stocks got de-rated, thanks to the rise in the rupee against the US dollar. As a result, frontline IT firms like TCS, Infosys Technologies and Wipro have been knocked out of the ranks of the ten most valuable companies.

For the PSUs, the current bull run in the markets has proved to be bountiful. These state-owned firms now account for 27.76 per cent of the total market capitalisation of Rs 6,336,000 crore, up from 10.49 per centof Rs 747,359 crore in 2000.

Going forward, the PSUs can expect to see a further rise in valuations. The average price to earnings ratio of all traded PSUs is currently at 17, compared to 26 for Sensex stocks and around 29 for non-PSU Sensex stocks.