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Top Five Navaratnas Of India

| 8/10/2012 7:00 PM Friday

After last week’s slideshow on India’s top five ‘Maharatnas’ status companies, we are continuing the subject with the top five Navaratnas. We have categorised the companies according to their market capitalisation. The difference between a Maharatna and a Navaratna company is that the former needs to be listed on the bourses, while the same is not applicable in case of the Navaratnas. However, in all, there are 14 Navaratna companies, of which only one company i.e., Hindustan Aeronautics is not listed, while the rest are listed on the bourses.

The benefits that the Navaratna companies get include the autonomy of Rs 1,000 crore, when they have to take any investment-related decision. Of these five companies, only NMDC has a government stake to the tune of 90 per cent, while the other four have government stake below 80 per cent. All of them are somewhat related to the energy sector either by dint of manufacturing equipment (BHEL) or energy transmission (Gail, Power Grid) or mining (NMDC and Oil India). Except for BHEL, all the other stocks in this list have been trading in the positive at the time of writing this report. Two companies from this list, namely BHEL and GAIL, have also applied for Maharatna status, the approvals being still under consideration.


Rank

Company

Sector

Market Cap

1

NMDC Ltd.

Mining

72,812

2

Bharat Heavy Electricals Ltd.

Manufacturing

56,098

3

Power Grid Corporation of India Ltd.

Electricity

55,325

4

GAIL (India) Ltd.

Manufacturing

46,857

5

Oil India Ltd.

Mining

29,094


NMDC

NMDC is one of the Navaratna companies owned by the government with a stake of 90 per cent and is the single-largest producer of iron ore in the country. Presently the company produces about 30 million tonnes of iron ore every year. It has three fully mechanised mines located in Bailadila in the state of Chhattisgarh and at Donimalai in Karnataka. The company has consistently paid dividend of Rs 2.15 for the last many years. For the latest quarter i.e. March 2012, the company has reported subdued numbers. The net sales of the company declined by 8 per cent to Rs 2,594 crore while the net profit has fallen by 12 per cent to Rs 1,642 crore. However, the stock price has jumped up by 13 per cent on an YTD basis to Rs 182.70.

Bharat Heavy Electricals Ltd.

Established in 1964, the company now holds a very dominant position as an integrated manufacturer in the power plant equipment market. It is also in the business of design, engineering, manufacturing, construction, testing, commissioning and servicing of a variety of products and services in various sectors apart from power such as transportation, renewable energy, oil & gas, etc. It has more than 150 project sites across India as well as abroad. The Government of India is a major shareholder in the company, owning 67.72 per cent of the total outstanding shares. With its dividend of Rs 6.40 per share in FY12 the company had a dividend yield of 3 per cent. This accounted for a dividend of Rs 1,060 crore in FY12. The dividend that it paid in FY12 was lesser than the earlier years due to the worrisome outlook for the capital goods’ sector. On an YTD basis this scrip is down by 3 per cent.

Power Grid Corporation India Ltd.

Power Grid Corporation (PGCIL) is the country’s largest power transmission company. It is responsible for inter-state transmission of electricity in India and owns and operates over half of the transmission network in the country. PGCIL is the most preferred share in the power sector as the company remains insulated from fuel shocks. Besides, it also partially remains free from any of the distribution losses. As it is a PSU, the Government of India owns 69.42 per cent of the shares in the company. On an YTD basis this scrip is up by 20 per cent. As for the CMP, it has a dividend yield of 2 per cent which provided the government a total dividend of Rs 658 crore in FY12. In that same year the company reported total revenues of Rs 10,035 crore with net profit of Rs 3,255 crore. The latest June quarter results saw PGCIL posting a healthy 31 per cent rise to Rs 2,888 crore in the revenues with a 23 per cent rise in net profit to Rs 870 crore.

GAIL India Ltd.

GAIL (India) Ltd was incorporated on August 16, 1984 as a public limited company with the name Gas Authority of India Ltd. It is the country’s flagship natural gas company, integrating all aspects of the natural gas value chain, including exploration & production, processing, transmission, distribution and marketing as well as related services. Of the total shareholding, the government currently holds 57.34 per cent of the shares. If GAIL gets the Maharatna status it has applied for, it will give it better financial autonomy. For FY12 the topline of the company increased by 24 per cent to Rs 40,397 crore while the bottomline of the company grew by a meagre 2 per cent to Rs 3,653 crore. The current dividend yield of the stock is more than 2 per cent. On a YTD basis the stock has given a negative return of around 5 per cent and is currently trading at a price to earnings multiple of 13 times.

Oil India Ltd.

Oil India Limited, in terms of total proved plus probable oil and natural gas reserves and production, is the second-largest oil & gas company in India. The company’s operations are spread across exploration, services in drilling, pipelines and production of oil & natural gas. The projects of the firm are located in India, Iran, Gabon, Libya, Nigeria and Sudan. The Government of India is the major shareholder with 78.43 per cent of the total outstanding shares. With a dividend yield of 7.75 per cent, the stock yielded the government approximately Rs 707.2053 crore in FY11. In FY12 the company’s net sales from operations stood at Rs 9,518.81 crore and the net profit at Rs 3,469.18 crore. The scrip has seen a capital appreciation of 0.88 per cent on an YTD basis.

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The recommendations provided in this column are taken from different market sources such as brokers, analysts, dealers and investment strategists, etc. These recommendations may not be backed by strong fundamentals. Dalal Street Investment Journal may or may not subscribe to these recommendations.

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