The Mukesh Ambani-led Reliance Industries (RIL) on Monday reclaimed the tag of the higher-valued Indian company from Tata Consultancy Services (TCS) after four years. The oil-to-telecom conglomerate is now valued at Rs 4.60 lakh crore, only slightly ahead of the Tata Group flagship which ended with a market capitalisation of Rs 4.59 lakh crore. Shares of RIL ended 1.2 per cent higher to Rs 1,416.4, ahead of its March quarter announcements.
Meanwhile, TCS added 0.8 per cent to close at Rs 2,329.1. Shares of RIL are expected to rise further, as the company posted better than expected fourth-quarter net profit after market hours. RIL posted 12.8 per cent year-on-year increase in standalone profit at Rs 8,151 crore for the three months ended March 2017, topping analysts’ estimates of Rs 8,000 crore. Higher gross refining margins boosted profitability.
TCS had surpassed RIL as the country’s most valued company in February 2013. The information technology major had cemented the numero uno position in the past four years. However, a change in outlook towards software companies due to weak growth forecasts saw TCS cede the position to RIL, which demonstrated a successful foray into telecom services.
So far in 2017, shares of TCS have lost 1.6 per cent, while RIL has gained 31 per cent. In comparison, the benchmark Sensex on the BSE has gained 11.4 per cent.
Interestingly, even though RIL followed by TCS are the country’s most-valued companies, ITC and HDFC Bank enjoy a higher weightage on the benchmark Sensex and Nifty indices. This is because the computation of the index is done on a free-float basis. Under this, shares which are available for trading are taken into consideration, while those owned by promoters, strategic investors or those under lock-in are excluded.
Therefore, TCS, with promoter shareholding of 73.31 per cent, has far less of a free-float market cap than ITC and HDFC Bank or even rival Infosys, which is less than half its market cap. Similarly, RIL, which has promoter holding of 46.32 per cent, is the third-biggest weight on the Sensex after ITC and HDFC Bank.
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