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India's Five Maharatna Companies

In India the Government of India not only gives direction to the country but also owns over 200 companies in various sectors. These companies are either owned by the various state governments or the central government and are called as public service unions or PSUs. Since all PSUs cannot be the same in terms of their business, financial strength and their impact on the growth of the nation, the government has created categories to rank them. These categories give some sovereignty to these PSUs while taking investment decisions. These categories are Maharatna, Navaratna and Miniratna.

Maharatna is the top category among the PSUs in which there are currently five companies. These PSUs are ONGC, Coal India, NTPC, Indian Oil Corporation and SAIL. Two other companies, Gail India and BHEL, have also applied to get the Maharatna status but their approvals are as yet pending. The government created the Maharatna category in 2009 to empower these PSUs with greater financial autonomy which enables them to expand their operations even on a global canvas.

In order to be a Maharatna company, a PSU has to clear several other parameters as mentioned below. A Maharatna PSU enjoys autonomy to invest Rs 5,000 crore in a joint venture or its subsidiary without government approval. The parameter for a Navaratna category PSU is Rs 1,000 crore. Among these five, the first three i.e. ONGC, CIL and NTPC are also Sensex participants and represent 7.41 per cent weight of the country’s premier capital market index.

Maharatna Name

Sector

Market Cap (Rs Crore)

Oil & Natural Gas Corporation Ltd.

Petroleum

236,773

Coal India Ltd.

Coal Mining

219,146

NTPC Ltd.

Power

134,648

Indian Oil Corporation Ltd.

Petroleum

63,867

Steel Authority Of India Ltd.

Steel

34,985

Oil & Natural Gas Corporation Ltd.

ONGC is one of the topmost oil exploration and production companies in the world. It represents nearly 3/4th of the total crude production and 81 per cent of gas production in India. It is the third-largest company in terms of market capitalisation at Rs 2,36,773 crore. In FY12, the operating income of ONGC was Rs 66,164 crore and its net profit was Rs 18,924 crore, making it India’s largest company in terms of net profit. In this valued Maharatna, 69.20 per cent of the total shareholding is held by the Government of India. With a dividend yield of 6.05 per cent, and a consistent dividend in the range of Rs 31 to Rs 45 per share over the last five years, the government received Rs 9,916 crore in the form of dividends in FY12, with an announced dividend of Rs 16.75 per share. The YTD return on the stock price of ONGC has been 7.67 per cent.

Coal India Ltd.

Coal India is the largest coal producing company in the world. Through its various subsidiaries it meets more than 80 per cent of the coal demand in the country. The company sells most of its coal at discount to international prices. Despite this its financial performance has been very robust in the last two years. The key to its profitability is e-auction coal which is sold at the market price. Currently it sells about 7 per cent of its total coal at the market price. This has caused improvement in its financial performance with the profitability ratios showing a multifold rise in the last two years. On YTD basis the stock has given 15 per cent returns to the investors. In the trailing four quarters ONGC has made a profit of Rs 14,995 crore on total sales of Rs 58,012 crore. Going ahead the company expects to keep its e-auction coal at the current level. Its production target for the current fiscal is set at 468 million tonnes. Coal India is a cash-rich PSU in which the government owns 90 per cent of the shares. The dividend yield at its current market price is 2.95 per cent, which gave government a dividend of Rs 5,627 crore.

National Thermal Power Corporation Ltd.

National Thermal Power Corporation (NTPC) is the largest power generating company in the country. It has a total power generation capacity of 39,174 MW. It also has 16,638 MW under construction. The company has diversified operations in power generation, coal mining, power equipment manufacturing, power trading, etc which makes it an integrated company in the power sector. Currently over 80 per cent of its capacity is coal-based while the rest is gas-based. The company is also developing about 1,000 MW of renewable energy capacity which will be commissioned by 2017. It has ambitious plans to become a 75,000 MW company by 2017 and a 1, 28,000 MW company by the year 2032. NTPC represents 27 per cent of the country’s total generation capacity. It has a market cap of Rs 1,34,648 crore and the government owns 84.50 per cent of the company’s shares. The dividend at its CMP is 2.63 per cent. The total dividend of Rs 4.3 per share means that the Government of India earned Rs 2,995 crore rupees by way of dividend. On an YTD basis the stock is up by just 2 per cent due to the investors’ weak sentiment on the sector.

Indian Oil Corporation Ltd.

Indian Oil Corporation Ltd (IOCL) ranks first when it comes to top companies by sales in India. For FY12, the company posted revenues of over Rs 4 lakh crore, the highest in India. The profit for the company for FY12 was around Rs 3,954 crore. The current market capitalisation of the company is around Rs 65,000 crore. IOC’s business consists of the entire hydrocarbon value chain - from refining, pipeline transportation and marketing of petroleum products to exploration and production of crude oil & gas, marketing of natural gas and petrochemicals. As on June 30, 2012, the Government of India holds 78.92 per cent of the total shareholding of the company. On a YTD basis the company has given subdued returns of around 5 per cent. The current dividend yield of the company stands at 3.55 per cent. And at the current market price, the stock is trading at a price to earning multiple of 16.4 times of its FY12 earnings. The dividend of Rs 9.5 gives a yield of 3.6 per cent, earning a dividend of Rs 1,820 crore.

Steel Authority Of India Ltd.

SAIL India is one of the largest steel producing companies with a total crude steel producing capacity of 13.8 MTPA. The company at present has a total market cap of Rs 34,985 crore and the Indian government holds 85.82 per cent of the total shareholding. The company has not yet announced its results for the June quarter. However, if we look at the March quarter, the company has done well. Its net sales have grown by 12.41 per cent on a YoY basis to Rs 13,691 crore while its net profit grew by 3.03 per cent on a YoY basis to Rs 1,576 crore. The company is on a huge expansion spree and is in the process of expanding its crude steel capacity to 21 MTPA which is expected to be commissioned by the end of FY13. It has a dividend yield of 2.37 per cent, thus earning the government a dividend of Rs 708 crore. On an YTD basis the stock has given decent returns of 16 per cent to the investors.

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