While the private sector companies are offering huge growth and have increased their values exponentially from shooting upwards of 30 % to 40% since the huge fall in March, PSE’s seem to have been the sleeping giant. As market is surging towards a V shaped recovery, PSU companies are been available in the realistic and discounted prices.
Before we further discuss what are these Maharatna and Navratna Companies, we need to understand what they are and what have been their historic significance. Navratna is a title which was initially given to 9 public sector companies in 1997.
Along with the title of Navratna, these 9 PSE’s also had higher autonomy to make investments giving them an ability to compete in the global markets.
Further in 2009, the Government of India established companies giving them the Maharatna title. To qualify for the Mahartna title, these PSE’s had to be a part of the earlier Navratna group and also needed to have net profits of over Rs. 2500 crores for 3 years, net worth of Rs. 10,000 crores and a turnover of Rs. 25,000 Cr.
As of today, 10 companies form up the Maharatna group, which are as follows
| Name | CMP Rs. | P/E | Mar Cap Rs.Cr. | |
| S A I L | 30.15 | 15.8 | 12453.5 | |
| B P C L | 380.55 | 18.91 | 82573.2 | |
| B H E L | 32.45 | 9.8 | 11299.3 | |
| H P C L | 223.65 | 9.36 | 34072.7 | |
| Power Grid Corp | 171.4 | 8.3 | 89696.6 | |
| GAIL (India) | 99.5 | 8.89 | 44899.1 | |
| NTPC | 93 | 6.44 | 91920.2 | |
| I O C L | 85.3 | 6.23 | 80302.8 | |
| O N G C | 85.75 | 4.88 | 107811 | |
| Coal India | 137.25 | 4.67 | 84614.2 |
While talking about today’s scenario, we can see that other than SAIL (Steel Authority of India Ltd) and BHEL (Bharat heavy electricals ltd) all the other companies come are Large Cap companies and still hold majority of market. When we study the specifics one thing that stands out for all Maharana companies have performed better on the Return on capital employed then the other companies of similar size.
As we study more about the Maharatna companies we cannot help but notice that most of the Maharatna companies have a reliance on the petrochemicals and the coal industry and it can be said that with the recent crash in the crude oil prices have effected their performance especially ONGC, HPCL , BPCL and IOCL.
But as the consumption of petroleum products increases so will the sales in these sector making it an attractive investing opportunity now.
When considering the overall interest coverage ratio is strong for all the Maharatna companies other then BHEL as it has seen a drop in sales and earnings in last 5 years.
Our Top Picks from Maharana Companies
- Coal India- Coal India Ltd is mainly engaged in mining and production of Coal and operates Coal washeries. The major consumers of the company are power and steel sectors. Consumers from other sectors include cement, fertilizers, brick kilns etc.
Our Recommendation -Buy
| Strengths Debt Free company Company has a interest coverage ratio of 59.02 | Weakness Declining net cash flow Promotor has decreased its holdings |
| Opportunity – Strong EPS growth High dividend yield | Threat – With the growth of renewables coal seems to be taking a back step |
- GAIL (India)- is also engaged in the business of Oil and Gas Exploration and Production to increase the access to gas supplies through equity and joint venture participation.
Our Recommendation – Hold
| Strengths – Increasing ROCE High market | Weakness – Increasing Expenses in long term projects Declining quarterly profits |
| Opportunity – Stock Gained 20% since last month | Threats- Declining net cash flow |
- ONGC- is engaged in exploration, development and production of crude oil, natural gas and value-added products in India and acquisition of oil and Gas acreages outside India for exploration, development and production, downstream
Out Recommendation- Buy
| Strengths -Zero Promoter Pledge Strong Financials | Weakness – Decline in profits for last 2 quarters |
| Opportunity – Stock has low PE ratio Mutual Fund houses have increased holdings | Threat – Promoter has decreased holdings |