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India's biggest wealth creators

You have been reading about how things have been looking up for Corporate India. Everybody is talking about an industrial and economic recovery that is quietly taking place. In the latest quarter of this financial year (July to September), most companies have been reporting better performances.

But what do these quarterly results actually mean to you, the individual investor? The Rediff Money Channel goes beyond mere audited financial results to look at informative trends. By examining each criteria that is of value to shareholders -- earning per share, market capitalisation, net profit, highest sales, operating profit margins, etc -- the Money Channel presents data you can use.

In the second of our series, we present India's Top 50 corporates by market capitalisation.

Market capitalisation is the market value of the company. It is calculated by multiplying the market price with the number of shares. If you want to measure the wealth a company has generated for its shareholders, this is the criteria to go by.

Earlier, a company's value was calculated on the basis of assets it had created. Now it is dictated by the price the market attaches to the company. An increase in the market price results in wealth creation to its shareholders.

For the second quarter of 1999 (July to September), the Money Channel checked out India's 50 corporates in terms of market capitalisation.

Topping the list once again is the market darling, Hindustan Lever, the local subsidiary of Unilever plc. Its market capitalisation is over Rs 51,000 crores, having grown 62 per cent over the last one year. This is in keeping with the increase of the BSE Sensex during this period.

Infosys and Zee Telefilms are the new entrants in the top 10 list. The market has significantly re-rated both the new entrants. Infosys and Zee enjoys a Price-to-Earnings (P/E) of 95 times and 207 times respectively reflecting the stock market's optimism on their future prospects. The market capitalisation of both these companies has grown over 600 per cent while the Sensex has risen 61 per cent. Talk about creating wealth.

Compared to last year, two notable firms have exited from the top 10 list-MTNL and Bajaj Auto Ltd. Their market capitalisation in this period has actually declined. MTNL, which has dropped one notch below to No 11, had a 6 per cent decline in its market cap. MTNL's inability to get ahead with the cellular operations as expected and the reduction in the STD and ISD charges impacted the revenues and profits adversely. As a result of this, its profit-before-tax (PBT) margins have declined from 39.8 per cent to 30.9 per cent.

In the case of Bajaj Auto, it has been losing market share to the other players in the industry. This has also affected its profitability. The Rs 34 crore increase in its PBT to Rs 194 crores over the corresponding period last year is matched by an increase of Rs 34 crore in other income to Rs 92 crore. Its market capitalisation in this period has declined by over 20 per cent to Rs 5,200 crores.

As a sector, the software industry has been the biggest gainer. The number of companies in the top 50 increased to seven from four in the previous year. And the collective market capitalisation has gone up to over Rs 76,500 crores from Rs 17,400 crores.

There is an interesting story hidden in this Top 50 list -- that of public sector navaratna, the Steel Authority of India Ltd. It is the only loss making company in this list. That is something to mull over. Good market capitalisation does not necessarily mean profits.

Note:

1. The EPS has been adjusted for differences in paid up value per share.
2. EPS are annualised.
3. OINC- Other Income
4. TINC- Total Income
5. PBT- Profit Before Tax
6. PBTM- Profit Before Tax Margin
7. MKTCAP- Market Capitalisation
8. PRICE- Market Price
9. ADJEPS- Adjusted Earnings Per Share

EARLIER IN THE SERIES:

Companies that gave you the highest Earnings Per Share

Stocks

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