CIL narrows gap with RIL in m-cap

Public sector firm Coal India Ltd (CIL) has consolidated its position as India’s second-most valuable company in just six months after its initial public offer (IPO). CIL has added over Rs 1 lakh crore to its market-cap, which currently stands at Rs 2.55 lakh crore. At this level, CIL is just about 17 per cent below Reliance Industries’ market-cap of Rs 3.09 lakh crore. RIL has been India’s most valuable company for more than a decade now.

The share price of CIL has gained 65 per cent to Rs 404 on the Bombay Stock Exchange and the National Stock Exchange from its IPO price of Rs 245, since it was listed on November 4, 2010. The sharp rise in the stock has narrowed the gap between CIL and RIL’s market-cap significantly.

According to sources, while CIL’s entry into the futures and options (F&O) segment is a done deal when the next batch of derivative candidates is announced, the stock’s entry into benchmark indices Nifty and Sensex, too, is not far away.

“CIL is definitely under consideration for inclusion in the benchmark indices. However, various other technical factors are also being considered for including or excluding the company in Sensex and Nifty,” said a top stock exchange executive. The addition of CIL will also see the combined market-cap of public sector companies go up to over Rs 9 lakh crore at Sensex from the current value of over Rs 6.11 lakh crore. The aggregate market-cap of private sector companies on Sensex is currently over Rs 21 lakh crore.

While market players believe that CIL may give a tough fight to RIL, they say it is not likely that the PSU will overtake the oil and gas giant as the largest market-cap company. CIL is peaking out, while RIL is bottoming, says independent equity advisor S P Tulsian, who tracks both the energy companies closely.

“The only worst case scenario in which the RIL share price can fall sharply over 10 per cent from the current price level is an adverse order by the market regulator, which has been rumoured for a long time now. The rest of the negative news has been factored in the RIL share price,” said Tulsian. The Securities and Exchange Board of India is probing RIL for insider trading in relation to its subsidiary Reliance Petroleum. Other negative news that has hurt the company stock price is its recent spat with the government over supply of gas from its Krishna-Godavari basin and inability to raise output. RIL’s $20-billion deal with British Petroleum has been positive news for the company, since its image suffered due to sibling rivalry in the Ambani family, promoters of the Reliance group of companies.

“In the near future, the gap between the RIL and CIL market-cap would still narrow as there is no major participation in the RIL counter from investors. The gap could narrow by $2 billion in market-cap but not more,” said Tulsian. Meanwhile, CIL is comfortably ahead of another oil and gas PSU giant, ONGC, in market-cap and Tata group information technology company, TCS.